America's Biggest Automaker Is Taking A HUGE Risk

Industry News / 11 Comments

But the payoff would be massive.

General Motors is currently America's biggest automaker. On a global level, it comes in fourth-place, with Toyota, Volkswagen Group, and Hyundai taking the top three spots, respectively. Fourth-place is a very respectable position but GM has made a gutsy decision to risk this for a bold new plan.

According to a report from the Detroit Free Press, GM will be risking its US market share as part of a long-term plan for an all-electric lineup. By 2023, GM promised to offer 20 electric vehicles, including full-on battery electrics and plug-in hybrids. A pure electric future, as CEO Mary Barra recently stated, isn't likely to happen for at least another two decades or so. In the meantime, GM fully knows it's in a strong position right thanks to, ironically, gas-guzzling trucks and SUVs, which continue to be very profitable.

Thing is, that won't last forever.

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"You have the gap period of time where you can ride the wave of your profitable products for a few years, so (shifting to electric powertrains) won't impact GM for the next two years," said John Murphy, an auto analyst at BofA Securities. "But that means GM has to kick it off in the time where they are in a period of strength."

The automaker finished last year with a 17 percent US market share but making the switch electrified vehicles will likely see that number drop, at least initially. One key area where it won't be competing in will be hybrid SUVs. Billions of dollars will instead be invested in future EVs. That means there won't be a hybrid Chevy Tahoe despite competitors already jumping into this segment. The Ford Explorer Hybrid is just one example.

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However, a battery-electric Cadillac Escalade has been rumored and all-electric GMC Hummer will also debut in the near future. It's also important to remember that the No.2 global automaker has seen massive US sales success with a certain vehicle, the Toyota RAV4 Hybrid, which happens to be the company's bestselling hybrid.

Now do you clearly understand the huge risk GM is taking? By skipping out entirely on hybrid SUVs and trucks and going directly to battery-electrics, GM could potentially lose millions of customers in the process. But remember, big risks can also bring great rewards.

"GM is realizing this is not an econo-box or toaster-box fight," Murphy said. "This is a luxury and niche product play and it needs to be developed as such. They're really taking a smart tact on this right now."

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Source Credits: Detroit Free Press

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