GM’s electric Cadillac is already sold out: what it means
General Motors (NYSE: GM) was one of the first major global automakers to say it would challenge the leader in electric vehicles You’re here (NASDAQ: TSLA). GM’s first long-range electric vehicle, the Chevrolet Bolt, was to critical acclaim, but it’s not a Tesla-type car and was never really designed to be.
Now GM is preparing a host of more advanced electric vehicles, including a direct competitor to Tesla, the Cadillac Lyriq electric SUV. In this Motley Fool Live broadcast, recorded on September 23, Focus on industry Host Nick Sciple and Motley Fool Senior Automotive Specialist John Rosevear note that GM said Lyriq’s first year of production sold out in under 20 minutes, and they offer investors a sneak peek automobiles of what this means (and doesn’t mean) for GM’s ambitious EV plans.
A transcript follows the video.
Nick Sciple: On the other side of GM, looking at the good news, you talked about all the reservations for the F-150 Lightning, we also talked about the high-end challenger Model X which Lucid dating. Well, GM has a top-of-the-line Model X challenger as well. They opened orders for the 2023 Cadillac Lyriq and sold out in 19 minutes. Some critics have said this shows that the big automakers are consistently underestimating demand for electric vehicles and not ramping up production. What do you think of this quick sale? Does this show that they are not doing enough, or is it because there is simply too much demand that they are breaking down the doors?
John Rosevear: There is more demand than they can meet. Let’s be clear: I have no idea of the total number of vehicles here. If it’s 500, if it’s 1,000, if it’s 20,000, I suspect it’s probably a few thousand, but I’m not sure. But that’s the same thing we’ve seen with Ford and its 150,000 Lightning reservations. There is a lot of interest here in these vehicles. What is probably still missing is the supply chain, the batteries. There is a lot of lithium in the ground, but it is not coming out as fast as we would like at the moment. The manufacture of batteries is intensifying. Everyone wants to make sure the quality is there. Everyone wants to improve technology. This stuff takes a long time to gain momentum. We are creating a complete alternative supply chain for the entire automotive industry around the world. It took a long time, and we have already spent a few years and billions of dollars on it. Everyone is used to seeing Tesla ramp up production. It was a big lesson for investors. Now it’s all the battery makers, all the component makers, all the engine makers, and all the other auto makers that put all these pieces of the puzzle together to make all of these cars. I am encouraged by the level of demand. Because it means that when the cars appear, the buyers will appear as well. Seems like people are excited about these things right now. But I think that’s a supplier bottleneck right now, and that’s why they’re aiming too low, and it’s not, “Oh, GM grossly underestimated.” GM may have underestimated to some extent, but it’s also probably GM that says, “Look, that’s how many vehicles we can make in the first six months or whatever, [laughs] with our agreements with our suppliers and what they tell us about what they will be ready for. “
Nick Sciple: Sales are never a bad thing, it’s just that there are always nuances in some things. You mentioned supply chains, their acceleration. We have also received news from GM regarding the increased vertical integration on their EV engines and the increase in efficiency. What should we take away as investors?
John Rosevear: They have developed what appear to be very good new engines. It’s not really a surprise. GM has a lot of intelligent engineering talent. They have been focusing on this for several years. Vertical integration is interesting because it moves away from the situation of the automotive industry in recent decades where it has a lot of suppliers specializing in an electric motor or specializing in the manufacture of seats or the like. They buy this, and it avoids some internal development issues. But I think with electric vehicles everyone wants to own the technology so that it can be a differentiator. If everyone buys the same engines, then what’s the difference? [laughs] While GM can at least claim a special sauce on its own proprietary engines, and there is probably a special sauce, and [likewise] Tesla and Ford Motor Company and everyone. Also, it could be, to some extent, a reaction to the shortage of chips where they want to control the supply. If you are wondering about uncertainties in US-China relations in the future, you probably don’t want to buy everything from suppliers in Shenzhen and Shanghai etc. It’s about having certainty and having control and so on. Again, this is a sign that this is for real. I’m not sure we need more signs of this from GM, but here’s another: They’re developing the technology in-house. I don’t think it’s extremely bullish or that investors need to jump up and down or worry. Either way, this is another step from the past, but it’s not surprising, and we can see why they probably do.
Nick Sciple: Part of that drumbeat of, “We really care about electric vehicles. We’re putting a lot of shavings on it. We’re making investments.” When you mentioned it, there might not be that great differentiation in engines, but you’ll see companies talking about it. I think it’s rampant in the auto industry because everything has its own special mark.
John Rosevear: Sure.
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