Originally published on Gas2.
One of the biggest electric vehicle announcements of the year so far was the surprise Chevy Bolt announcement from GM in January, the revealing of an affordable, long-range electric car from a major manufacturer. This is the second “affordable” and “long-range” electric car announced by anyone, only trailing the Tesla Model 3. But it is actually supposed to go into production before the Tesla Model 3.
With Nissan selling approximately 20,000 affordable, 84-mile Leafs a year in the US alone, and Tesla selling a similar if not higher number of its expensive but long-range electric cars in the US alone (~50,000 world wide), one would think that there would be a huge market for an affordable and long-range electric car like the Chevy Bolt. Even if limited to the US, 30,000 Bolts a year seems absurdly pessimistic. So, why the low target?
Two big reasons come to mind. The first potential reason is that GM doesn’t want to be too optimistic and then get crushed in the media or tarnish the EV market if it doesn’t come close to the target. This already happened with Nissan, because Nissan assumed the many benefits of EVs would lead to much higher Leaf sales. Aside from simply being cautious for that reason, GM may also be scared that buyers would choose the Tesla Model 3 over the Chevy Bolt — that’s certainly what the initial results of our EV owner & lessee survey indicates.
However, I think it’s another factor that is really holding back GM’s target — projected battery supply. An EV Obsession reader made the point pretty clear in a recent comment on the site (minor edits implemented):
“However, battery production is the big thing. They can only build 30,000 because LG doesn’t have that much production capacity. They had never fully built out the Holland, MI, LG plant that supplies GM and Ford. They are doing that now. Since LG’s sales of EV-related batteries have been really poor thus far and they suffer from chronic underutilization, it is difficult for them to invest the billions into plant(s) expansion(s) beyond finishing to nameplate capacity. That’s why Tesla’s Gigafactory is all that much more remarkable. With Panasonic’s Osaka plants churning out about 8 GWh by the end of next year for Tesla, LG won’t be able to match that level of output within that time period. As a result, all of LG’s customers will be sharing something around 6 GWh of production. With the Tesla Gigafactory then adding another 7 or so GWh of production in its first phase, we’re looking at about double the production capacity over LG. So VW/Audi, GM, Ford, and others that have signed up for LG’s output will share production of less than half of Tesla’s production in 2017. As Tesla brings on more phases, the rest will have to move quickly to even avoid falling further behind.”
I don’t think I could have explained the situation better. LG doesn’t have the production capacity, but it is not going to risk a big increase in production capacity until its customers (GM, Volkswagen/Audi, Renault, Ford, etc) show that they can and will sell enough electric cars to warrant it.
Of course, without the ramp-up in production, it is harder for LG to bring down battery costs, so we have a bit of a chicken-and-egg problem here. It seems like the best-case scenario right now would be if the Chevy Bolt demonstrated huge customer demand, prompting LG to “quickly” ramp up production, but that is still likely to put LG and all the automakers that rely on it at least 2–3 years behind Tesla.
It’s an interesting situation. If you have more insight on the matter, we’d love to see it in the comments.