Is The Chevrolet Bolt EV Really A Compliance Car To Help GM Continue To Sell Gas-Guzzlers?

The first mass-produced electric car to go on sale with a price tag of less than $40,000 and a range in excess of 200 miles per charge, the Chevrolet Bolt EV is now available to buy in its launch markets of California and Oregon.

Developed in double-quick time by General Motors working in collaboration with South-Korean electronics specialist LG (which made many of the car’s components, including its 60 kilowatt-hour lithium-ion battery pack, 150-kilowatt electric motor, countless in-car displays and power electronics system), the Chevrolet Bolt EV may appear to be GM’s biggest statement on electric vehicles since the much-missed EV1 20 years earlier.

Is the Chevrolet Bolt EV just a compliance car?

But despite the fanfare with which GM unveiled the Chevrolet Bolt EV concept car at the 2015 Detroit Auto Show and the enthusiasm demonstrated by GM CEO Mary Barra when the production Chevrolet Bolt EV was presented at CES 2016 in Las Vegas back in January, it seems that GM’s attitude toward electric cars may not be what it seems.

In fact, GM’s attitude toward electric cars may not have shifted far from the attitude it had back in 2003 when it official shut down the EV1 program and slowly, inexorably, started to take back perfectly functioning EV1 at the end of their leases and crushing them.

The new 60kWh battery pack seems like a lot for a ‘compliance car’

At least, that’s according to JP Morgan analyst Rick Brinkman, who (reports Electrek) published a note to clients last week hintingthat GM was building the Bolt EV at a loss in order to ensure it receives the zero emission vehicle credits it needs to continue producing its internal combustion engine vehicles. Internal combustion engine vehicles which not only have a far larger profit margin than either the Bolt EV or Volt range-extended EV but are easier to sell to customers who don’t want to give up their large SUVs and pickup trucks and view global climate change as someone else’s problem.

Brinkman, who met with Stevens last week, advised investors in his note that the Bolt EV is part of an “improving array of electric vehicles from automakers which are pricing such vehicles with the aim not to turn a profit but rather to sell in sufficient volume to subsidize the rest of their more lucrative portfolios of internal combustion engine vehicles from a regulatory compliance perspective.” Avoiding specific details about the conversation he had with GM’s CFO, there’s much reading between the lines here and, to be honest, a little speculation coming from our friends at Electrek over the specifics.

Translated, Brinkman’s note suggests that the Bolt EV is little more than a compliance car. For those unfamiliar with the term, that’s a car designed and sold by automakers (under duress) so they can meet zero emission mandates in the ten states across the U.S. where automakers must sell a specific proportion of zero emission vehicles or face fines: California, Connecticut, Maine, Maryland, Massachusetts, New Jersey, New York, Oregon, Rhode Island and Vermont. But while the note suggests these things, it doesn’t claim them, leaving us (and anyone reporting it) in a grey area.

GM is certainly following a compliance car launch pattern.

Under ZEV regulations, the more cars an automaker sells, the more zero emission vehicles they must produce. Small volume automakers can often make do by buying excess ZEV credits from automakers like Tesla which, under current ZEV rules, can sell its excess credits for money. For a large automaker like GM however, it’s often more cost effective to produce limited numbers of compliance cars.

The possibility that GM is selling the Bolt EV as simply another compliance car is certainly disheartening, especially if true, but is hardly surprising given GM’s past attitude towards electric vehicle and its name beside those of other major automakers on a recent letter to the incoming Trump administration to block the EPA’s new fuel consumption standards for cars.

Taking everything into consideration, we think it is indeed possible that GM, like other automakers, is using its electric vehicle portfolio to help ease the increasing pressure it finds itself under from both ZEV states like California and wider governmental bodies like the the DoT and EPA, who are responsible for respectively setting the Corporate Average Fuel Economy and Air Pollution targets which new cars must meet. And while the EPA’s air pollution regulations are harder to game, the CAFE standards are, by their very name, only an average. Therefore, if an automaker produces large numbers of electric vehicles, it can produce equally large numbers of heavy duty pickup trucks with terrible gas mileage, since the average fuel economy across the fleet still meets guidelines.

It’s true too that gasoline vehicles do have a far higher profit margin than electric vehicles, if only because of the economies of scale in play and the high cost of lithium-ion battery technology.  Over time, these economies of scale will inevitably shift but for now, internal combustion engined vehicles are still cheaper to produce and as such, have a higher profit margin.

We’re hoping this particular suggestion is not true…

But at the same time, this suggestion doesn’t make sense. For a start, GM seems to have gone through an inordinate amount of work to produce a long-range, ground-up electric car simply for compliance purposes, leading us to suggest that the note issued by Brinkman is missing important context.

Had GM truly wanted just a compliance car, it would have likely spent far less time and energy bringing the Bolt EV to market. Granted, it recently changed its launch plans from a simultaneous nationwide launch to one in which ZEV states were given first dibs on the new car, but based on what we know of the Bolt EV, a full roll out is still expected.

Does this mean we should ignore the report? No. As anyone who has been in the electric vehicle world for any length of time will attest, electric vehicles still have plenty of opponents, including the oil and gas industry and many ‘old guard’ within the automotive world.

But at the end of the day, there’s something we want readers to remember: in the past decade, we’ve seen a major increase in interest and sales of plug-in vehicles. And as we approach the end of 2016, there are more electric and plug-in vehicles on the world’s roads than ever before. What’s more, with competition from the likes of Tesla, automakers will make whatever they need to ensure they don’t lose market share or relevance.

And that, simply put, means it’s down to customers to demand more plug-in cars. When faced with the buying power of their customers, change will come.

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  • Martin Lacey

    At no point have GM declared the Bolt to be a mass market vehicle.
    It is made on a shared assembly line which would suggest that it is not intended for mass market production.
    The national roll out has been delayed – indefinitely!
    The roll out is a restricted “trickle” (GM’s word not mine).
    Oh yes – you can only get it in the “green” states for the foreseeable future.

    So far GM have used a lot of hype and are under delivering.

    I think we can safely call the Bolt a compliance car, until such time GM demonstrate otherwise… national/international roll out, RHD version for the global market, dedicated production line(s) and mainstream advertising!

  • Stefan Wilms

    When I first read that the Chevrolet Bolt comes without a quick charge possibility as standard, I could not help but to come up with a cynical tag line: “The Chevrolet Bolt. Brought to you by the crushers of the EV1.”

    EV1-crushers notwithstanding, when the car hits European shores as the Opel/Vauxhall Ampera-e next year, I hope it will still be a very interesting newcomer.

  • Richard Goldsmith

    The reluctance to make an RHD version does throw weight to the compliance argument, but I don’t trust Electrek to deliver a true perspective after some of their reporting of late being questionable at best. I think there may be some truth in the line that the costs are still higher than they bargained for and rather than price themselves out of the market they are waiting for the costs to come down before going all out when they can finally make a profit.

    • Stefan Wilms

      Oops, I have overlooked the fact that there will not be a RHD Bolt/Ampera-e, so no Vauxhall in the UK or Holden in Australia. Which means no fully electric GM cars in those markets. Which suggests they are not really interested in spreading the message that EV’s are the automotive future.

  • Albemarle

    I think there are a few reasons for GM to produce the Bolt. The most immediate payback will be to allow them to sell more trucks and SUVs in California & other regulatory states. This reason also will resonate with Wall Street. By producing more than they need for this activity, they reduce the unit cost of the car, they get lots of free publicity in the non-automotive press, and they expand their in-house expertise with EVs. Just like being involved with autonomous cars and car sharing services. Lots of change and you don’t want to be caught flatfooted.
    The fact that the vehicle isn’t available worldwide, instantly, is merely a marketing decision, not the sure evidence of Satanic activity. Where is our Outlander hybrid for North Americas? Obviously Mitsubishi is just pure evil.
    We will be getting our Bolt this spring. I know others won’t get them that soon, and that’s unfortunate. I don’t care why GM is making the car. (I heard that Mary Barra’s hairdresser’s aunt is a big fan of EVs.)

    • vdiv

      There are indeed multiple reasons, but unfortunately compliance seems a major one. Getting some of the limelight away from Tesla and other EV makers seem another. Hedging bets and keeping a “leadership” position in the development of EVs is a third.

      That said GM losing money on the Bolt EV is a preposterous argument that was also made with the Volt. They have barely started making and selling it and there are a lot of upfront costs. We will not be able to determine the profitability until the last one leaves the factory as we don’t know how many they will make and how the economies of scale will reduce their build cost.

  • The Bolt is not a compliance car in it’s design, but certainly may be a compliance car in the eyes of the GM finance and marketing teams.
    The GM and LG engineering teams that built the Bolt certainly felt free to innovate, and I truly appreciate the results of their hard work. The shame is that GM is larger than that small EV team, and the larger GM may squander a golden opportunity to set the pace for the next generation of vehicles.
    I own a Tesla and a Smart ED. I test drove the original Volt and liked it! I look forward to eventually test driving a Bolt, and am sure I will like it too. But I am waiting with deposit down on a Tesla Model 3 because it will be a compelling EV built by a company that is driving the industry forward, and for that, I’m willing to wait and put my money into a company I believe will help the “EV movement”.

  • It seems to me that GM changed its tune on the Bolt EV shortly after the election. With what they probably view as a friendly president elect, no need to rollout more Bolt EV’s than absolutely necessary.

    So why develop this amazing car if only to hobble it at the last minute?

    Had Clinton won the election, GM would view the likes of Tesla as a serious threat in an EV friendly regulatory environment, and in that environment GM would want a ready made competitor to the Model 3. With less concern over regulations, the need to compete head on with Tesla is reduced. GM may have concluded that EV’s are going no where in the next 10 years and will simply roll out compliance cars. Business as usual.

    Disappointing.

    Oh well I’ll cling on to my Model 3 reservation, I’ll be in one of the first waves for the Model 3 having lined up to put down my reservation deposit.

    • vdiv

      Just like with the Volt, and the EV-1 the biggest and possibly lethal threat to the Bolt EV is GM itself. We hope that Tesla won’t do that, but I fear that it is certainly capable of it.

  • Jeff Songster

    Well… if it is a compliance car… subsidized to the rumored 9k per… get them while you can… but buy them… don’t lease… and keep them from the crusher that way. Looks like a nice car… going to test drive one soon. If you get it before fearless leader destroys the tax credit. He works for big oil as shown by his sec of state choice.

    • IanStuart

      Under no circumstances buy the Bolt. Lease it if you can stand not having a Supercharger network. If GM kills it in a year or so at least you won’t be left with an orphan

  • Alex

    Compliance car sound always bit negative. But the Bolt is a great car, like it more than the Model 3 because of good entrance and more appealing hatchback for Europe. But I think GM will sell this car in limited numbers, so yes from the selling numbers it will be a compliance car.

  • Yeah it’s a compliance car

  • Low volume, slow rollout in limited geographic regions, limited plans to increase production, tall hatch form factor that sells poorly in the U.S. all point to compliance car unfortunately.

  • If it is just a compliance car then GM have clearly learned nothing in the last 20 years. Get on with it!