GM may have been selling the Opel Ampera-e at a huge loss

Discussion in 'Bolt EV' started by JeremyK, Nov 29, 2017.

  1. JeremyK

    JeremyK New Member

    I think this articles sheds some light on why there is limited Ampera-E availability in Europe. It's not some ridiculous conspiracy theory (GM hates EVs) as many have opined . It's simply business. GM no longer owns Opel and PSA is a competitor.

    GM was willing to take a loss on each Ampera-E to meet regulations, but PSA apparently didn't factor that into the purchase price of Opel. My guess is that PSA doesn't want to take a loss on each sale in order to meet regulatory requirements, at least not without getting some money out of GM through litigation.

    https://www.reuters.com/article/us-...from-gm-over-co2-emissions-idUSKBN1DT1NA?il=0
     
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  2. Domenick

    Domenick Administrator Staff Member

    Well spotted.

    "Among the unpleasant surprises was a CO2 compliance plan that relied on significant sales of the Opel Ampera-e electric car, a U.S. import based on GM’s Chevrolet Bolt, at a loss approaching 10,000 euros per vehicle, two sources said."

    A 10,000 Euro loss converts to $11879.50. So, does that mean GM is losing, say, $11,500 per Bolt it sells? If so, it would explain a few things.
     
  3. JeremyK

    JeremyK New Member

    Losses could be slightly higher on the Ampera-E due to shipping, tariffs, etc but this does somewhat verify the $10K/Bolt loss number that has been thrown around for about a year now.

    When the Bolt launched, and it was revealed the the cells were going to be made in S. Korea, I suspected that battery production would be moved to the LG facility in Holland MI eventually...probably for a major cost savings. My guess is that they wanted to launch out of a proven facility, with local technical/corporate support in Korea, then build an identical line in Holland and eventually move production.

    I haven't heard anything to support that, other than that the Holland plant was undergoing a large expansion during 2017.
     
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  4. Domenick

    Domenick Administrator Staff Member

  5. WadeTyhon

    WadeTyhon Well-Known Member

    This would not surprise me at all. We had a long discussion about the subject a month or two ago on the forum:

    http://insideevsforum.com/community...the-bolt-ampera-e-supply-demand-problems.145/

    “The only rumors I have read pertaining to a lack of increased production is related to Europe. GM hasn't been profitable selling ICE cars in Europe for decades... selling the lower-margin electric Ampera-E to PSA isn't going to change that.

    While the Bolt is almost certainly profitable on a per-unit basis in the US... it probably isn't for PSA.They have said that they will only allow Opel to transition to an electric car maker if it is profitable to sell them without incentives. And they have vowed to make Opel profitable within just a few years.”

    PSA doesn’t care much about EVs when PHEVs hybrids and gassers are going to be more profitable. They will not be willing to take a loss to gain a leadership position in BEVs.

    Their goal now is to right the Opel ship. So the idea of GM expanding pure EV tech to meet regulations must seem illogical to them.
     
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  6. Domenick

    Domenick Administrator Staff Member

    I shared this with my editor and got assigned to write it up. :p

    So, here's what I came up with after doing a bit of poking around: GM Reportedly Suffered $12,000 Loss Per Ampera-e (Bolt) Sold By Opel

    My take away? PSA is in deep doo doo because it didn't invest in low carbon technology (and others -- ahem, FCA -- may be too). Also, while GM has gone and built a reasonable all-electric car, it hasn't truly committed yet to volumes beyond what is helpful to it with regards to CARB. I'm sure larger volumes are part of the plan, eventually, but it's doesn't seem interested in aggressively trying to gain market share.
     
  7. Pushmi-Pullyu

    Pushmi-Pullyu Well-Known Member

    I am dismayed when I see blanket statements like "GM is losing $9k on every Volt" or "GM is losing $11k on every Bolt EV." That's a kindergarten-level of financial analysis.

    We need to make a clear distinction between sunk costs and unit costs. Sunk costs -- that is, costs which have already been paid and can't be recovered -- include R&D and tooling up the assembly lines to produce a model of car. Once those are done, it's pretty silly to charge them against the profit margin for sales of those cars. Let me give an example of why it's pretty silly:

    Let's say that GM made just one Bolt EV and then shut the line down, never to make another. Using "kindergarten accounting", the entire cost of R&D and tooling up would be charged against that one car! The cost, figured that way, would be in the hundreds of millions or even billions of dollars for that one car. Contrariwise, let's say that the Bolt EV proves to be a very popular car, and GM continues to make it for several years with only minimal year-to-year changes. In that case, again using "kindergarten accounting", the R&D and tooling up costs would be spread over hundreds of thousands of cars. By kindergarten accounting, then, the cost per car keeps getting significantly lower the longer GM keeps the car in production, altho the per-year drop in cost tapers off over time.

    In reality, once production actually starts, it's the unit cost that matters. The sunk costs of R&D and tooling-up don't matter, because they have already been paid.

    Any claim that GM is "losing" X number of dollars per car is charging all the development costs against a single year of estimated production. If the car model is made for two years, then the development cost, by that same kindergarten accounting, drops to half. But of course, in real life no such drop in cost happens. Again, the sunk costs have already been paid for, and are irrelevant to the question of whether or not the auto maker should continue making the car. It's also irrelevant to what the ongoing profit margin on the car is.

    (Hopefully most if not all of my readers realize there is a fallacy in my argument: Sunk costs certainly do matter in the larger picture, as they affect GM's bottom line. GM's bean-counters certainly will be watching costs for R&D and tooling-up closely, and if they think a potential model doesn't have sufficient market potential to justify those development costs, then it's likely GM won't put the model into production. But there are exceptions to that rule, too; for example, compliance ares are not expected to justify their development costs.)

    I realize that most people (certainly including myself) don't want to be accountants. But altho I'm far from being a "financial guy", I think it's absurd in discussions of auto maker finances, to keep using this kindergarten level of analysis. I think the average person is smart enough to be able to understand the importance of distinguishing between sunk costs and unit costs for making cars, once the concepts are explained to him or her.
     
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  8. Pushmi-Pullyu

    Pushmi-Pullyu Well-Known Member

    Well, we've already discussed that on this forum, with me taking that side of the argument, but it was pointed out that GM is selling the Bolt EV in non-CARB States in the USA, and not in just token numbers, either.

    See, in particular, WadeTyhon's post here:

    http://www.insideevsforum.com/commu...ampera-e-supply-demand-problems.145/#post-826

    Do you think GM is really taking a substantial loss on all cars sold in non-CARB States? I, for one, do not. My guess, and of course it's only a half-informed guess, is that GM is making at least a small per-unit profit on domestic sales of the Bolt EV in non-CARB States. I'm also guessing they do lose money on sales in Europe, on a per-unit basis, but -- as I detailed in my post above -- I don't think it's either logical or reasonable to claim they're "losing" $10k-11k per car.
     
    Last edited: Dec 1, 2017
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  9. WadeTyhon

    WadeTyhon Well-Known Member

    I completely agree with you. And so does GM who sees this as the first step up a large staircase towards EV adoption and autonomy. We know from the UBS tear down that the Bolt costs about $29k to actually build. So a premier Bolt has pretty good potential for profits as production increases and costs continue to fall.

    Of course, PSA doesn’t have the same ability to utilize the Bolt EV platform or any future GM EV platform. They also have not made any major effort to push EVs on their own up to this point.

    The Bolt EV will probably never be profitable for PSA since it is imported from outside Europe and they are buying it from a different automaker.

    And GM has no reason to lower the price to a level that is more in line with whar PSA could consider acceptable. Since GM can make far more on each unit by selling it in the US.

    So neither company has the incentive to increase Ampera-e sales. A hybrid built by Opel in Europe will be more cost effective than an Ampera-e.
     
  10. God

    God Member

    The tweet mentions the word "segment" then mentions "crossovers"...While intentionally vague, an EV is the powertrain, not a segment, yet what did GM call the Bolt EV's segment at launch which raised some eyebrows? The Bolt is a hatchback, in the model name GM mentions "hatchback" for their Sonic Hatchback and Cruze Hatchback but GM calls the Bolt EV a crossover and crossover sales are up 25%...No chance of the Bolt EV as a crossover segment losing money...

    Some additional datapoints I'll mention:
    - Like any other vehicle, higher margins come from higher trims and options where industry insiders state the margins are about 50%...
    - Lease-wise, GM along with most automakers does usually offer a higher discount in CARB states and we just recently saw Hyundai offering $6500 off CARB leases...
    - Lease-wise, for whatever reason, Chevy has offered insane lease deals on all it's electrics...The Gen1 Volt at one time had $0 down $199/mo national offer...Spark EV, $0 down and $139/mo (although it was only sold in three states)...Gen2 Volt and Bolt EV haven't had any insanely lower national offers but what they have had is all sorts of targeted incentives (Lease loyalty, Grad discount, etc) where both at one time could be had for $0 down, sub $200/mo before state/local incentives/rebates if one qualifies for the target incentives...The "loss" comes in the form of GM Financial receiving lease turn ins who resale is way less than how it was leased...
     
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