Instead of investing in the future, GM chose to buy back shares. Just think, in the not so distant future they may own the majority of a dying company.
Thanks for the link, couldn't agree more, Tesla rocks, and I am happy to be a long time investor in this great company since IPO.
While I tend to agree with the article, I would nitpick to point out that buying back shares does not result in the company owning itself. The bought-back shares are destroyed, meaning that each remaining share controls a slightly larger portion of the company. In theory a stock buy back is returning money to investors just like a dividend except that the money is realized when the stock is sold, so it counts as capital gains and is taxed at a lower rate. In practice, the market is a bit more irrational and chaotic, but it still works roughly that way.
The point of the article is that GM could find NOTHING better to spend their money on, besides share buyback.
No big investment in battery factories, EV factories, charging networks . . . hardly any real growth beyond hybrids and weirdmobiles.
If Tesla is spending $5B on Gigafactory 1, then why isn't GM?
Right. My comment was not about the article but about what the original poster said. It was just a nitpick. The substance I agree with. I probably shouldn't have posted.
Tarla's Driver, don't be too hard on yourself, you're both correct.
The fact remains that GM is not too overly concerned with the whole EV thing right now.
Their focus is on profits for the shareholders and currently that comes from selling ICE's.
Only time will tell what is in the future for all of us.
GM still doesn't see EVs as a significant share of the market. If they make incremental improvements to their current lines, they need incremental improvements to their factories, if any at all. If they need to come up with entirely new factories to make motors and batteries and EVs, and go through the effort that Tesla does to have an entirely new model, including all the engineering work and all the software development, then if they sell an EV, it's at the expense of an existing sale of a traditional car.
That doesn't mean they'd be better off not doing it. If they don't do it, they will lose sales to EV manufacturers that excel. If they do make those investments, they will keep from losing a sale, spend as much as Tesla to create the infrastructure and design the car, but get no additional profit by doing so. Effectively it would amount to building a new car company from scratch by going through the effort that Tesla is going through, and at the same time watching their old business die. If they are going to watch their old business die either way, they won't be able to stay solvent.
GM management focus is no doubt on GM management income. Buy back increases stock price for GM management and it increases the bonuses they get for increasing stock price as well. A double win for them.
Sadly, this has become the main management focus for far too many US (even global?) corporations. Sitting on mountains of cash (how much cash does Apple have? for example) and the best they can think to do is drive up stock prices with buy backs. No doubt they claim they are making us great again, right?
"That doesn't mean they'd be better off not doing it. If they don't do it, they will lose sales to EV manufacturers that excel. If they do make those investments, they will keep from losing a sale, spend as much as Tesla to create the infrastructure and design the car, but get no additional profit by doing so. Effectively it would amount to building a new car company from scratch by going through the effort that Tesla is going through, and at the same time watching their old business die. If they are going to watch their old business die either way, they won't be able to stay solvent."
Looks like they have two choices. Do nothing and wither on the vine or embrace the future and hope to maintain existing sales. If they didn't have their head in the sand, with their resources, they could have been a leader in the emerging EV market. Pride can take down the best of them.
GM will never see EVs as the future until they go into bankruptcy again.
The top people at GM are not dumb. I think they are distracted because they did not pay enough attention to Chambers, "If you are playing politics, you are not focused on the customer."
... What would happen to GM stock if they said, "We are not going to provide guidance past June."?
Im in the high end IT world, GM is no different than CISCO, Dell, HP etc. They are not going to go quietly, and they can easily acquire their way out of this if they wanted.
Wait until another amazing EV company comes along, pay 7 billion for them, and there ya go. Its not any different than IT where all the young companies innovate, then the old dogs buy them up.
Innovation does NOT come from the established players, but they will pay for it
We are talking about a company that has been known to buy public transit rail lines across the nation only to tear them down, so they could profit on more cars. In later decades we had to bail these F&*$%wads out of bankruptcy. I have no love loss for these conspiring fools at GM. Big oil has invested in them as well; for me the writing is on the wall.
Dunginhawk is right, they'll wait for the market to mature and buy up a smaller more agile company only to rebrand or re-market themselves. The good thing for Tesla stock holders is that these boneheads will need to buy battery packs from somewhere.
I have no special insight into GM's thinking or automotive philosophy, but I would point out that they sell what is probably the best overall EV for most people, the Chevrolet Bolt. I have yet to read a non-positive review, and while I'd hope that the Model 3 will be superior, it's still months away and the specifications are still Double Plus Secret.
That the Bolt is as good as it is means that there's a least a group of engineers and marketing people inside GM that do in fact "get it". We can hope this attitude spreads; of course, sales volume is what will determine this.
It's been a tenet of faith among the EV faithful that a sub-$35K EV with more than 200 mile range would be the tipping point. The Bolt's weakness is of course its lack of a nationwide charging infrastructure; still, there's cause for hope.
I dont understand why people are outraged or surprised by this. GM can buy all the batteries they need for the near future from LG Chem. Right now, with EV sales a drop in the bucket compared to the overall vehicle sales, no CEO from a long established OEM is going to come out and say they are going to plunk down 5Billion for a battery factory until they know that its profitable for them to do so. THEY do not have a business case for it, granted, some of that is self fulfilling prophecy by not building an exciting electric vehicle and lack of charging infrastructure, etc.
Contrast that with Tesla, who can and HAS to make the business case for it, and wall street still hates it. Tesla is the anomaly, they tell wall street to suck it, we are going to do whats best for our business. 99% of the other corporations in America bow to the will of the shareholders, and will do what they need to in order to meet their quarterly and yearly goals for fear of their stock price dropping in the short term. Tesla doesnt care or at least appears to not care what wall street and shareholders have to say, which is part of what makes them awesome. But they do listen to their customers, or at least make the appearance thereof.
GM is investing in the future, but they dont have the need to burn through cash for R&D like Tesla does. So they are taking a tepid approach, they arent going to jump both feet into electric and abandon their bread and butter vehicle lines and technology. They are hedging their bets somewhat by having the Volt and Bolt, partnering with Ride-share companies, and building that EV experience (to a lesser degree than Tesla obviously).
GM stinks. The Bolt is fine. Superchargers are the key. It doesn't require a dissertation.
Dear nadurse -
Tesla is doubling the 2013 Li Ion battery production to make about 500,000 vehicles/year.
Do you seriously think GM can buy that many from LG?
The reason Tesla built GigaFactory was because they could not find enough batteries to buy.
For GM, you just change the motor and add batteries. EVERY THING else about the car business they already have. So how hard can it be? Now going electric won't solve other GM problems - note how Cadillac is selling. I suspect the main reason GM only making about 30,000 (for US and perhaps 30,000 more for the rest of the world - but now that Opel being sold who knows what will happen to Opel Bolt?) is they can only arrange to buy 30,000 from LG.
It will be an interesting year to see unfold in electric car sales/production.
Top 10 automotive r&d spenders, 2015
VW $15.3 billion
Toyota $9.2 billion
Daimler $7.6 billion
GM $7.4 billion
Ford $6.9 billion
Honda $5.5 billion
BMW $5.5 billion
Nissan $4.6 billion
Denso $3.6 billion
FCA $3.4 billion
TESLA $720 million
Just what is GM doing R&D spending on??
IF you didn't read OP Forbes article, GM spent over $5 billion on stock buy back.
Tesla and Panasonic (how much per year?) are building a $5 billion dollar FACTORY.
Tesla still very small compared to almost 100 million ICE annual production.
GM spent over $16 billion in stock buy backs rather than on batteries or another electric vehicle. Great management, which will make America great again.
At least GM is honest about it can't use the money in a good productive way in the business. It's Apple I really don't know what it wants to do with all those money it has. A company should return money to share holders if it does not have good use of it. Share holders could invest the money in more worthy companies, like Tesla, themselves.
Yes I read the article and yes I am well aware of Tesla's investments in the gigafactory. I doubt that GM could buy that many (500k vehicles worth) battery cells for their packs, but thats exactly my point. Let me reiterate that GM doesnt have the same demand that Tesla does for EVs, because at this point they think they dont need that many EVs made to be successful. They are taking a tepid wait-and-see approach, but hedging their bets by designing and building the Bolt and Volt. I am not saying that its the correct or virtuous thing to do in the long run, but the CEO takes its cues from the shareholders and their goal is to make them happy and help the stock price. Shareholders and investment firms generally like stock buybacks. Thats all.
I would be interested too to see what that R&D budget is, for all of the OEMS for that matter, and how much of that goes into vehicle electrification. I would guess there is a significant investment in that area, not enough to build a battery factory though ha.
GM has admitted that they are losing money for each Bolt they make. One VP said they could afford it because they are making a lot money on selling SUV's. They could afford to make 30K of them but I doubt they could afford to make 10x that.
It's alarming that the largest car company in the world, with the largest production facilities and who can afford to make the best deals with suppliers, still can't turn a profit on an EV with a base price of $37,495.00.
This would seem to contradict the oft-expressed opinion here that EVs are in any way price competitive with ICE vehicles.
You said "This would seem to contradict the oft-expressed opinion here that EVs are in any way price competitive with ICE vehicles"
Perhaps you're onto something. Maybe that's the intent.
Actually, this is highly consistent with GM's behavior in the late 1990's when the EV1s were out. They appeared to listen to what we customers said would help make the cars better or the acquisition process better -- and they would do the opposite. We'd tell them we loved the cars -- and they'd publish in their internal newsletters and the press that nobody wanted the cars.
I'm sure anyone who walks into the GM boardroom will be very popular if they say: "We spent $1.5B developing this EV technology and made a great car but, unfortunately, they just aren't economically feasible, therefore you guys can keep your jobs running the powertrain and power plant divisions with your $3M/year salaries and bonuses."
That's an interesting point of view. Under Trump, the fuel economy guidelines are toast, giving GM more profit per every truck they want to sell, as they don't have to invest in increasing fuel economy. Easier money to be made selling what they already have a huge market advantage in. Bolt will take much longer to generate profits, and with no compulsion to lower MPG numbers across the board, there is no need to push this car.
Dramsey Gigafactory. Get it?
E&N That's the point. Decision makers from those companies all rose from ICE background. Their buddies are still running those key departments developing engines and transmissions. There is no way they would accept to have their expertise to be less visible in the company without putting up a good fight. That's the reason disruptive technology and products are almost always brought upon by new comers. I said almost because I could only find one example from everything I've heard that it isn't true.
Nadurse, you're probably right. EV's are not in GM's comfort zone. They have a proven formula to print money. Why rock the boat and risk failure. What I don't understand is how any reasonable business person, especially those entrenched in the auto industry can look at the dynamics unfold in regards to the shift away from fossil fuel and towards EV's and not come to the conclusion that ICEV's have had their run. Now it's EV's turn. I truly believe in one generation we will see EV's outsell ICEV's and in two generations, EV's will be the majority of all registered vehicles.
GM is eating the seeds, regardless of how hard they push back, they will all be dragged, kicking and screaming into the EV world for the bulk of their sales/profits. It's just a matter of time and time is running out. They are about to have their Kodak moment. Not the kind you find in Disneyworld either.
"Dramsey Gigafactory. Get it?"
Funny, I was there just this morning. Although I'm under nondisclosure I think I can repeat that the nice tour guide said the goal was to reduce battery cost by 30% short-term. Obviously that will go a long way towards helping lower-cost vehicles be profitable. If Tesla can turn a profit on the Model 3 at a retail price similar to what GM is selling the Bolt for at a loss, that will obviously be a major advantage.
Elon sets the bar higher than GM does.
Are all the companies doing launch services as capable as space X?
Like SamO said, this is simple and doesn't require a while dissertation. Traditional OEM's real customers are dealers. Dealers get a very large chuck of their profit/revenue from parts and service. EVs require next to nothing in this regard compared to ICE cars. So why would dealers buy any EVs from the OEM's?
Dramsey, I don't see how the Bolt can be the "best EV" for most people, when it can only travel 100 miles before you have to turn around and go home. The Bolt is still not available outside of CA and OR. If the reports are true that sales have actually slowed down, why doesn't GM start selling them elsewhere to bolster the sales? Any dealer that is certified to sell Volts should be able to sell Bolts.
So I wouldn't exactly call a car that requires twice the overall travel time as an ICE and is only available in 2 states as the "best EV" for most people when it is not available in most states. For just a couple thousand more dollars than a "Premier" Bolt, one can buy a used MS60, with unlimited supercharging.
"Dramsey, I don't see how the Bolt can be the "best EV" for most people, when it can only travel 100 miles before you have to turn around and go home. "
It's simple: it has the highest range of any non-Tesla (higher than the 60D), and it has a good price. If you want a reasonably priced EV with the best range today, that's your choice-- assuming of course you live in CA.
"But wait!" you cry. "It doesn't have supercharging and is thus unsuitable for highway use!"
Well, yes. But this was pretty much the case when I dropped $115K for my P85 in 2013, and yet somehow I managed. Level 2 chargers are becoming more common, and Bolt owners who want to road trip will simply have to invest the up-front charger research I had to in 2013. In California, which is sprouting Level 2 chargers like weeds, I don't think this will be too much of a problem, although the slower charging times are still an issue.
Offsetting this issue is the very substantial advantage of Chevy's massive dealer network. Yes, we can alternately sneer and moan about ICE dealerships, but the fact is that Tesla's relative lack of service facilities is still an issue in a lot of people's minds. Joe Sixpack still looks askance at that weirdo Elon and his space stuff and fancy electric cars, but Chevy? Hell's bells, boy, it was good enough for my pappy and grandpappy, and it's good enough for me.
Don't sneer at Joe. If transitioning to EVs is the goal you support, he's the one you'll need to convince.
"Traditional OEM's real customers are dealers. Dealers get a very large chuck of their profit/revenue from parts and service. EVs require next to nothing in this regard compared to ICE cars."
People keep saying this. But it hasn't been my experience.
When I bought my 2013 Audi A6 Prestige, a 3-year service contract was $820. Today it's about $900. That covers all the standard stuff: oil changes, cabin air filter, tire rotation, etc.
A three-year maintenance plan on my new Model S90D is $1,625, despite its not having many of the things that are serviced on my ICE. Admittedly Tesla says the yearly service is not required to maintain your warranty so you can skip it. But new cars buyers looking at service costs won't see that.
I have 44,000 miles on my A6. It has never required a non-scheduled service. That is to say, nothing has gone wrong, ever, with anything: not so much as an indicator light. I did have a flat once but I don't think that counts.
My 2013 P85 required multiple unscheduled services: it was delivered with a nonfunctional nav system, and required service for minor things like sun visor mirror covers falling off to more significant issues like 12V battery replacements to "contactor service" and several others.
My 2016 S90D had to have its drive computer replaced. Tesla picked it up, fixed it, and dropped it off, so I certainly have no complaints there.
But the point is that while I love Tesla and have bought two Model S cars, they have been both more expensive to maintain and less reliable than my A6.
I think the "lower maintenance cost" thing will only really kick in once you pass the 50,000 mile marks and major things start to break on ICE vehicles.
VW is taking a page from Tesla:
Each location would typically have about five chargers or charging stalls. All of the chargers would be next-generation units designed to support a maximum charging rate of at least 150 kilowatts with about half of the chargers supporting a rate of up to 320 kilowatts, according to Volkswagen’s draft plan. The sites are being designed to be “future proof” for medium to long-term use rather than just meeting the immediate needs of today’s electric cars.
VW Reveals Tesla-like EV Charging Planshttps://apple.news/AcCOS55uXM36FwxP_ZEAB_A
".... assuming of course you live in CA. " Exactly. Now for the rest of the country...........
Blanket statements can only be such if it applies to all or most of the country. If a car is not available everywhere, you can't say it's the "best out there". There a lot of cars available in CA that no one has ever heard of. Take the hydrogen cars available out there. One could say for example that the Toyota Mira (or whatever it's called) and say it's the best H2 car out there. No it's not, because no one can buy it except in CA.
The GM dealer network would be an advantage if every dealer was required to put in multiple charging stalls, were open 24/7, and had restaurants on the premises for people to eat.
I too bought my car when there were next to nothing for superchargers in New England, but Telsa said they were going to build out the network. GM flat out said they would not build out a network to support the Bolt.
As for the maintenance plan costs, the difference is that the "maintenance" as in the annual services on your Tesla, are optional. Go 3 years in an Audi without doing anything to it aside from tire rotations.
There's no doubt Tesla is high maintenance. This has to get addressed. My car, which incidentally passed the no return point of 50K miles yesterday has seen a lot of small and some big issues.
This will only get fixed as time goes on and Tesla gains experience.
I'm keeping my fingers crossed in the meantime. Didn't go for extended service.
Not to split hairs here, but there is a difference between maintenance and repairs. Just as you wouldn't call an oil change a repair, you wouldn't call replacing a fuel pump as regular maintenance.
Maintenance is generally considered routine items tended to based on time/mileage.
Repairs are fixing things that break.
Replacing a DU in a Tesla, repair
Flushing brake fluid every 2 years, maintenance.
Think about it, any maintenance agreement, be it Tesla or Audi, covers items that are maintenance service items and warranties cover repairs.
I'll comment on why Tesla is different; there are allusions to it further up in the thread. Tesla can afford to somewhat disregard Wall St and conventional 'focused on the next quarter only' investor thinking that bedevils OEM corps all over the place. How? Because they have seemingly trained THEIR average investors into high level long term thinking about what the investment means. Which is why so many investors are willing to let their investment largely ride to the utter consternation and fury of shorts of the Stinking Alpo type who are both absolutely correct about Tesla fundamentals and yet 100% completely wrong at the same time. The irritation versus amusement quotient gap has gotten so large recently that I had to let my subscription lapse to S. A. I still miss their wailing, gnashing of teeth, and hot little tear-filled temper tantrums when Tesla survives yet another day to rub their little noses in it.
"Not to split hairs here, but there is a difference between maintenance and repairs. Just as you wouldn't call an oil change a repair, you wouldn't call replacing a fuel pump as regular maintenance."
Quite true, if perhaps irrelevant. The mechanical simplicity of a BEV, without the multitude of systems requiring regular maintenance and repairs, is often cited as an advantage due to presumably lower operating costs. For Tesla, though, this isn't the case, at least during the initial ownership period. I'd expect an ICE car to be more expensive some years down the road when it's more common for ICE cars to have problems.
On the gripping hand, there's the specter of battery pack replacement. How much will it cost? Well, let me note one thing in passing: as best I know, the Gigafactory ain't making 18650 cells...
Sorry about that, I don't know what happened to make my post to come out that way.
Jordan, I think you were quoting the infrequent and simple maintenance procedures in your weird message.
I agree: Teslas maintenance is very simple and infrequent.
So why does a service contract for my Mod S cost twice as much as the service contract for my Audi? My wallet doesn't care about anything other than the money being taken from it.
"the Chevrolet Bolt. I have yet to read a non-positive review, and while I'd hope that the Model 3 will be superior, it's still months away"
The Bolt is still months away for most people (my local Chevy dealer says 'spring', and I am in a CARB state). Plus if that were it's sole advantage, they wouldn't sell any after the Model 3 came out. They may not. I expect that the Model 3 will beat the Bolt in 2017 sales. And it won't even be consider a competition in 2018. GM could have fixed the worst problem with the Bolt by a simple phone call. They didn't.
Thank you kindly.
"I agree: Teslas maintenance is very simple and infrequent."
I am sorry, I don't. My 2013 build has been to the shop 15-20 times in the 4 years. Felt like every quarter there were a new set of small or sometimes big problems. It's a great car, but definitely buggy. The reliability rating (remember reading about it a while back somewhere online) for this car isn't very good, IIRC.
+1 Topher. The Model 3 will crush the Bolt. It's just out and already lagging. I suspect people are waiting for the Model 3 and passing on the Bolt.
If only there were some Network of charging stations. They'd have to be fast, almost Super. A Super. Charger.
Now I've lost it. Oh well . . GM will eventually get it. Or go bankrupt.
Ok, who here thinks an oil change, transmission fluid change, and brake fluid change are "repairs"?
Perhaps I am looking at things different than most. I associate the term routine maintenance as things done on a prescribed timetable be it mileage or miles. Hence why I don't see replacing a door handle pressure sensor as "maintenance", it is a repair. When you get an oil change in an ICE, do you say "I got my oil fixed"?
As for why the service contract on an Audi costing less than a MS....I can't say for sure. One would have to look at a line item list of what is done. How much time does the Audi dealer spend on the car. An oil change can be done in 15 mins. yet I bet it cost $100 for that oil change, which works out to $400 an hour. Even after subtracting the inflated cost of the oil and oil filter, you are still paying a lot more than the typical hourly rate that Tesla charges.
Again, the annual service for a Tesla is optional. If you chose to get it done, that was one's choice.
Look at the warranty for DU and battery pack. It's 8 years, infinite miles. The only thing that Tesla says to do to the DU/battery pack is change the coolant out at the 4 yr mark. So one could go 325,000 miles in 7 1/2 year yrs and only service the "drivetrain" once, at the 4 yr mark and still be under warranty. Try that in ANY other car.
Also for the record, I in 2 weeks, I will be taking my car in for it's 3rd annual service, on the literal 3rd anniversary of taking delivery and by that point I will have 72,000 miles. About a month ago, I had to have the driver's handle pressure sensors replaced ($212). Now my rear passenger handle sensors are faulty (handle comes out, but won't open). So, while it's in for it's annual service, I will have them fix (repair) that door handle.
From the VW installing chargers article, this is encouraging...
"VW has no plans to fund hydrogen fuel cell vehicle filling stations during this first round of spending but may do so in the future. California is strongly encouraging VW to add hydrogen fueling investments in later years."
What happens when the Toyota Mirai (and the Tucson Fuel Cell from Hyundai), sell but 1,000 units, combined, per year, compared to the tens to hundreds of thousands of Model 3? 1st principles and physics...meet the Model 3.