General Motors (NYSE:GM) was one of the first big global automakers to say it would challenge electric-vehicle leader Tesla (NASDAQ:TSLA). GM’s first long-range EV, the Chevrolet Bolt, has won critical acclaim, but it’s not a Tesla-type car and was never really intended to be.
Now, GM is preparing a slew of more advanced EVs, including a direct Tesla competitor, the Cadillac Lyriq electric SUV. In this Motley Fool Live broadcast, recorded on Sept. 23, Industry Focus host Nick Sciple and Motley Fool senior auto specialist John Rosevear note that GM said the Lyriq’s first year of production sold out in less than 20 minutes, and they offer some insight for auto investors into what that does (and doesn’t) mean for GM’s ambitious EV plans.
A transcript follows the video.
Nick Sciple: On the other side of GM, looking on the good news, you talked about all the reservations for the F-150 Lightning, we also talked about the high-end Model X challenger that Lucid is coming out with. Well, GM has a high-end Model X challenger as well. They opened up orders for the 2023 Cadillac Lyriq and sold out in 19 minutes. Some critics have said this goes to show that the big automakers are consistently underestimating demand for electric vehicles and not ramping up production. What do you make of this rapid sell-off? Does it show they’re not making enough of them, or is it so there’s just way too much demand, they’re beating down the doors?
John Rosevear: There’s more demand than they can fulfill. We should make it clear: I don’t have any idea what the total number of vehicles is 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 don’t know that for sure. But it’s the same thing we saw with Ford and their 150,000 reservations for the Lightning. There’s a lot of interest here in these vehicles. What’s lacking is probably still the supply chain, the batteries. There’s plenty of lithium in the ground, but it’s not coming out as fast as we want yet. Battery manufacturing is scaling up. Everybody wants to make sure the quality delivers. Everybody wants to improve the technology. This stuff takes time to ramp up. We’re creating a whole alternative supply chain for the entire auto industry around the world. It has taken time, and we’ve already spent a few years and billions of dollars doing this. Everybody’s used to seeing Tesla ramp up production. Now, that’s been a big lesson for investors. Now, this is all the battery makers, all the component makers, all the motor makers, and all of the other automakers ramping up all of these pieces of the puzzle to make all of these cars. I’m encouraged by the level of demand. Because it means that when the cars appear, the buyers will appear, too. It looks like right now, people are excited about these things. But I think it’s a supplier bottleneck right now, and that’s why they’re aiming too low, and it’s not, “Oh, GM greatly underestimated.” GM might’ve underestimated to some extent, but it’s also probably GM saying, “Look, this is the number of vehicles we can make in the first six months or whatever, [laughs] with our supplier agreements and what they’re telling us about what they will be ready for.”
Nick Sciple: Sellouts are never a bad thing, it’s just that there’s always nuance to some of the stuff. You talked about supply chains, getting those ramped up. We also got some news from GM about increasing vertical integration on their EV motors and increasing efficiency. What should we be taking away from that as investors?
John Rosevear: They’ve developed what appear to be really good new motors. That’s not really a surprise. GM has a lot of smart engineering talent. They’ve been focused on this for several years now. The vertical integration is interesting because it goes away from where the auto industry has been in recent decades where they have a lot of suppliers who are specialists in an electric motor or a specialist in making seats or whatever. They buy that in, and it saves some of the trouble of developing stuff in-house. But I think with EVs, everybody wants to own the tech so it can be a differentiator. If everybody is buying the same motors, then what’s the difference? [laughs] Whereas GM can at least claim special sauce on their own proprietary motors, and there probably is some special sauce, and [likewise] Tesla and Ford Motor Company and everybody else. Also, this might be, to some extent, be a reaction of the chip shortage where they want to control the supply. If you’re wondering about uncertainties in U.S.-China relations going forward, you probably don’t want to be buying everything from suppliers in Shenzhen and Shanghai and so forth. It’s about having certainty and having control and so forth. Again, it’s a sign that this is for real. I’m not sure we needed more signs of that from GM, but here’s another one: They’re developing the technology in-house. I don’t think this is hugely bullish or anything that investors need to jump up and down or worry about. Either way, it’s another step from the past, but it’s not surprising, and we can see why they’re doing it probably.
Nick Sciple: Part of this drumbeat of “We really care about electric vehicles. We’re putting a lot of chips down on this. We’re making investments.” When you mentioned, maybe there’s not this big differentiation in motors, but you’ll see the companies talk about it. I think that’s endemic in the auto industry as everything has its own special brand.
John Rosevear: Of course.
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