Five years after exiting the European market, General Motors Co. is examining how to return as an electric vehicle player.
The move makes sense, experts say, but to be successful in a region where it struggled for years — especially during its final 20 years of ownership — will require a game plan to sell and service the right kinds of EVs for that market. Establishing the plan and distribution network will take time, experts expect, placing any GM larger scale reentry in the latter half of the decade.
“If you look at their production footprint for electric vehicles based on what we know now, they don’t have the capacity to deal with getting into Europe at volume before the end of the decade,” said Stephanie Brinley, principal analyst for S&P Global Mobility. “I don’t think we’re really talking about a near-term scenario.”
GM bolted Europe in 2017 when it sold its Germany-based Opel and United Kingdom-based Vauxhall businesses to Groupe PSA of France, which has since merged with Fiat Chrysler to form Stellantis NV. The Detroit automaker only sells a small number of vehicles there today — about 1,000 in the first half of the year, according to sales reports.
“We have no seller’s remorse from an internal combustion business,” GM CEO Mary Barra told CNBC’s Brian Sullivan at the Milken Institute Global Conference in May, referring to GM’s Opel-Vauxhall deal with PSA. “But we are looking at the growth opportunity that we have now because we can reenter Europe as an all-EV player. I’m looking forward to that.”
And again in July, she told the Associated Press that GM is forming plans to reenter the market with EVs: “All I can tell you is I think it’s a huge growth opportunity for the company, and we’re excited to be back.”
GM hasn’t yet provided specific details on how it intends to reenter Europe. But the automaker late last year named Mahmoud Samara president and managing director of GM Europe, touted by the company as “a non-traditional mobility start-up.”
“Europe is one of the fastest growing EV markets in the world, with advanced EV infrastructure that continues to progress,” Samara said in a statement to The Detroit News. “Our scalable EV technology based on our proprietary Ultium platform gives us the flexibility to launch EVs across all segments and for every type of customer. We have the portfolio and technology to compete successfully in Europe, and initial reaction to global launches has been very strong.”
The European market
Europe, the third largest automotive market in the world, could be an area for GM to grow its profits and bolster its EV credibility. But the market, like its other regional rivals in Asia and North America, has seen a downturn in recent months amid the war in Ukraine, inflationary pressures and supply chain constraints.
The latest sales data from June shows passenger car registrations continuing to fall in the European Union with supply issues limiting production output. Overall, sales dropped 15% year over year with 886,510 vehicles registered, marking the lowest month of June on record since 1996, according to the European Automobile Manufacturers’ Association representing the 16 major Europe-based car, van, truck and bus makers.
All four major EU markets saw declines with Germany posting the steepest decline of 18%, followed by Italy with a 15% drop and France with a 14% decline.
In the first half of 2022, new car registrations in the EU are down 14% from 2021. LMC Automotive forecasters are projecting sales for the year in Western Europe to fall below 10 million, declining 6% over last year’s 10.59 million.
EV sales in the EU have continued expanding, accounting for 9.9% of total passenger car registrations in the second quarter of the year, according to the European Automobile Manufacturers’ Association. Meanwhile, market share of gas and diesel vehicles continues to shrink, dropping from 62% in the second quarter of 2021 to 55.8% in the second quarter this year.
The EU’s implementation of new CO2 emissions standards in 2020 and some new government subsidies for EV purchasers helped to advance EV adoption, according to the Paris-based International Energy Agency, an autonomous intergovernmental organization.
The EV stock worldwide hit 10 million in 2020. Europe saw the largest increase that year with registrations doubling to more than 1.4 million and making it the world’s leading electric car market for the first time. China followed with 1.2 million registrations, and the United States remained third at 295,000.
“The transition of our business model and the transition to an environment for EVs in Europe is a match made in heaven,” Samara said. “As we are creating a non-traditional mobility start-up, we do have a once-in-a-lifetime chance for a clean-sheet approach in Europe that is focusing on a customer experience staying ahead of customer expectations.”
Last year, China led EV sales with 3.3 million, followed by Europe at 2.3 million and the U.S. at 630,000. China and Europe in 2021 accounted for more than 85% of global electric car sales, according to the IEA. From 2016 to 2021 period, EV sales in Europe have increased by a compound annual growth rate of 61%, the world’s highest.
“Going to Europe and China for electric vehicles is a little more priority than North America actually,” said Warren Browne, an auto supplier consultant and former GM executive who spent 40 years working for the automaker, including stints in several European markets. “They seem to be more willing to do incentives that are less complex than what the government is currently proposing in the United States.”
How GM can be successful in Europe
To succeed where it failed for its past 20 years in Europe, analysts say GM will need to determine whether it wants to be a higher-volume EV player or provide a finite amount of EV products to the European market. Differing strategies would require different game plans.
“If it wants to be a high-volume player in Europe, then maybe it does need manufacturing and a more robust distribution system,” Brinley said. “If the goal is to say, ‘hey, the Cadillac brand has some products that fit there’ … it might not need full manufacturing and there’s the opportunity to import from China, perhaps. So it doesn’t necessarily need to be a North American export.”
In the U.S., GM has pushed larger, more expensive electric vehicles like the GMC Hummer EV. Next year GM will offer the electric Chevrolet Blazer, Equinox SUVs and the Silverado pickup. But to successfully sell EVs in Europe, it will need to offer smaller-size vehicle offerings more common in European markets.
Another consideration for GM: weighing the costs associated with producing EVs outside the region — namely North America, China and, come 2025, South Korea — and then shipping them into Europe. That’s especially a concern now with the value of the euro down. The currency dropped below the dollar in July for the first time in almost 20 years.
“The exchange rate will be negative for General Motors to import the cars to Europe,” said Ferdinand Dudenhöffer, director of the Center Automotive Research in Duisburg, Germany. He said GM establishing partnerships with other automakers to build in Europe would make more sense.
“You have small volumes because General Motors is not popular in Germany and Europe. You have high development costs for cars, and then you have to ship the car to Europe and build up a sales system,” he said. “So it’s very expensive.”
Germany is the largest and most important market in Europe and accounts for 26% of all battery electric vehicle sales there, according to the Center for Automotive Research there. And it’s home to Tesla Inc.’s only assembly plant in Europe — its “Gigafactory Berlin-Brandenburg.”
Tesla’s cars have appealed to European customers. In Germany, Tesla ranked second for sales with its Model 3, second to the Fiat New 500. Tesla’s Model Y also ranks in the top five.
Meanwhile, Ford Motor Co.’s electric Mustang Mach-E hasn’t made much of a splash, Dudenhöffer said, offering numbers to bolster his claim: In Germany there were 196,000 battery electric vehicle sales in the last seven months and of those 2,700 were for Ford Mach-E, representing 1.4% of sales.
“The same would apply if you bring over General Motors cars from the U.S.,” he said. “They are not in the heart of (the) customer. Customers in Europe have other preferences for cars.”
The competition also includes more favorable brands from Volkswagen AG, Stellantis, Renault Group and the Japanese and Korean automakers. Hyundai Motor Co., for example, fields the Kona EV — the fourth best-selling EV in Germany this year, according to data from the Center for Automotive Research.
Browne, the former GM leader who now works as a supplier consultant, sees potential for Chevy and Cadillac in Europe with their EVs. But he says it will be “a pretty big undertaking.”
To become a volume EV player, GM “will have to have a selling system that’s more than take an order and we’ll deliver it to you from our compound in France. It has to be a little bit more extensive distribution network in order to get volume and scale.”
GM will need to have at least a few EVs that will compete against Tesla and Volkswagen to sell at volume levels, which would be 50,000 or more a year, Browne said: “Fifty-thousand would be a bogey with four or five products as a Chevrolet reentrance into Western Europe.
“You have to have a critical mass portfolio to make that move back into Western Europe or else no one is going to take you seriously.”