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Discussion Starter #1
And it will end, perhaps this month or perhaps a year or two from now (if current law remains unchanged). When it does, how should/will GM respond?

1. Reduce Bolt prices by ~$5k - $7k, to keep net cost to customers the same, and maintain sales volume? (Note: not all customers qualify for the tax credit.)
2. Leave Bolt prices unchanged, and accept the drastic reduction in US sales volume that will naturally result? Maybe sell the Bolt more in foreign markets?
3. Reduce prices, but by a smaller amount, and get a result somewhere in between? Perhaps this would maximize GM's net profit?
4. Something else?

It's been a long time since I studied economics, but I'd guess #3 is the best decision. Maybe a price cut of around $3k, very soon after the tax credits end.

What do you think GM will do?
 

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GM is on track for credits to expire around Q3 2019, which is roughly when the other big players will also face credit expiration (Tesla, Nissan). Ford, BMW, and Toyota are expected to expire around the middle of 2021. As companies consume their credits, other brands will have EV offerings, and those will become more popular. The executive office will be Democrat by then, unless they try to run H again. The new administration may create a new credit, which won't be as large as the current credit, but likely just as anti-progressive (only the wealthy have the means to take advantage of the credit). It really should be cash credited directly to the purchase price, regardless of tax liability (assuming the subsidy is the best use of taxpayer money).

Rumor has it that the marginal cost (direct materials and labor cost) to produce each Bolt is greater than GM generates from sales. If that's true, there is no room to reduce the price. GM would have to figure out how to massively reduce the marginal cost.

While some people "need" the range of the Bolt, Nissan chose the more appropriately sized battery for the average consumer. When prices are unsubsidized, buyers will think more conservatively when considering their range needs.

The Bolt is benefiting from a temporary market monopoly. I expect sales to weaken (in the near term) once the M3 and Leaf 2.0 hit the market.

EVs will still be an insignificant market segment when the tax credits expire, so GM doesn't have to do anything. Prices will drop as efficiencies in production are realized.
 

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Worst case could be all the US 'compliance cars' disappear if politics go really weird and CAFE gets repealed.

Maybe only Tesla would survive.

And you've made an important point that is seldom emphasized: the tax credit is only of value to people who have $7,500+ of tax liability in the year of purchase. That's not everybody. A simple rebate would broaden eligibility. I'm retired, I qualify for the full rebate, but if I had chosen different retirement savings models years ago then the full tax credit might not be available.
 

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The UBS tear down indicated that the Bolt is selling at a slight profit. I.e the materials and labor costs are less than the selling price, even with the discounting going on. It’s only when you add in R&D and coupled with low sales volumes that the car appears to be a money loser. But as more vehicles are sold, and the technology developed makes it way into other platforms, the program that created the Bolt will become a money maker.

GM has invested way too much money in the Bolt to let the car die just because it appears that the EV credit is going away. It’s in their best interest to try to fight to keep the credit alive, even if it helps the EV johnny-come-latelys.
 

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IMO if one believes recent media about GM’s aggressive preparation to enter ride-hailing services. It won’t matter much if the EV industry’s regular retail volume drops off due to higher cost to consumer. Resulting from scheduled expiration of the tax credit or it’s sudden demise due to tax law change.

GM will concentrate on ride hailing “fleet” volume generating much higher revenue per vehicle that’s available with continuous usage of a long-life & low maintenance vehicle like Bolt.

Near term battery cost will continue to decline due to better sourcing of the rare materials, not necessarily better battery technology. That may contribute a little to reduction in regular retail prices. But GM’s biggest opportunity will be economies of scale and the tremendous bump up in per-unit revenue associated with GM’s entry into above-mentioned fleet business.
 

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Keep in mind that a Bolt sold in a CARB state gets GM 4 ZEV credits worth $13k. Selling a Bolt outside CARB gets them $0 in ZEV credits.

So another choice is that GM drops the MSRP on the Bolt, and restricts (or discourages) sales in non-CARB states....who can still buy used Bolts at market prices later.

And if the CARB rules get overturned by the Pruitt EPA....then the whole US EV market blows up.
 

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Here is the investor presentation that the GM CEO gave a couple of weeks ago. It outlines how they intend to profit from EVs:
https://www.gm.com/content/dam/gm/events/docs/5265845-684463-Chartset-11-15-2017

I think they have a better strategy than anyone else. The Bolt is already considered a dead platform. They will build two other models from it and then it will be retired. The main goal for the Bolt is not profit. GM is learning from the Bolt and gaining mind share. That's what matters at this point.

The next generation platform is the one that matters. GM will build dozens of models from it. That platform will allow them to make EV's at a very high profit margin.

I really like GM's strategy (from a profitability perspective).
 

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I agree that the Bolt is about engineering data and mindshare rather than profit. Engineering cost will be amortized over other, future models.

That said, losing $10k or more per car (in marginal production cost) is not something they want to do....I am confident the car is profitable, at the margin, in CARB states.
 

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what was the article a few weeks ago, GM releasing 20 EVs in the next few years? they obviously know that the EV tax credits are going to run out, and are planning on selling cars without the benefit of the rebate. they seem pretty committed to me.
 

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We already know what happens when subsidies end because it has already happened in other countries.

EV sales dropped 60% when Denmark eliminated the import tax exemption.


Tesla sales vanished after Hong Kong lifted the registration fee exemption.

This isn't to say that EVs are going away, only that sales will be drastically impacted when subsidies go away. A decade of subsidy should be sufficient to see if the technology will stand on its own.
 

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That said, losing $10k or more per car (in marginal production cost) is not something they want to do....I am confident the car is profitable, at the margin, in CARB states.
True. However, at the end of September GM had $17.3 billion in cash on hand, and another $14.1 billion in lines of credit. Assuming they sell 30K Bolts at a loss of 10K each that's a $300 million dollar loss, or < 1% of available liquidity. They have time to determine if economies of scale can be made to work in their favor.
 

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Keep in mind that a Bolt sold in a CARB state gets GM 4 ZEV credits worth $13k. Selling a Bolt outside CARB gets them $0 in ZEV credits.

So another choice is that GM drops the MSRP on the Bolt, and restricts (or discourages) sales in non-CARB states....who can still buy used Bolts at market prices later.

And if the CARB rules get overturned by the Pruitt EPA....then the whole US EV market blows up.
ZEV credits do not have a guaranteed value. Earning them allows GM to avoid fines that are $5000 per missed credit. GM can sell them on the open market to other manufacturers who aren’t meeting their ZEV credit goals, but there’s no guarantee GM will get $5000 for each one they sell.

Up through the end of this year, each Bolt sold in a CARB state earns 4 credits. Starting next year is when it only earns 2.8 credits.
 

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Perhaps GM should be offering some good deals on New Year's Eve, then?
Only if the EV credit is truly dead. It’s still in the Senate version. And they only have some 2 or 3 weeks to reconcile the two versions and vote again to pass it, plus pass a budget so the government can stay open...
 

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Discussion Starter #15
Only if the EV credit is truly dead.
No, not because of the tax credit, because the manufacturer gets better ZEV credits for a sale on 12/31 than for a sale on any later date.

If anything, EV tax credit expiration would cause them to raise prices this year, and lower them in the new year.
 

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Only if the EV credit is truly dead.
No, not because of the tax credit, because the manufacturer gets better ZEV credits for a sale on 12/31 than for a sale on any later date.

If anything, EV tax credit expiration would cause them to raise prices this year, and lower them in the new year.
Basically, GM has every incentive to sell as many Bolts as possible this month. I think 4k is in play.
 

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No, not because of the tax credit, because the manufacturer gets better ZEV credits for a sale on 12/31 than for a sale on any later date.

If anything, EV tax credit expiration would cause them to raise prices this year, and lower them in the new year.
ZEV credits are based on Model Year, not the calendar year.

They can count 2017 Bolts delivered thru as late as June. The exceptions are for CT, ME and RI (data from those states is due no later than May 1) and OR (data due Sept 1 with no specified delivery period).

The restructuring of ZEV credits is why we are seeing heavy discounting by GM in CA. The travelling rules are very complex, but they can utilize ZEV credits earned in CA to the "S177" (Section 177) states without actually decresing their CA credit balance. If, however, they want to use 177 credits in CA, their "bank" in the State/Region they transfer d=credits from will be decreased by a proportional amount.
For example: If a manufacturer had 4000 credits in California, and chose to travel all 4000 credits, it would end up with 4000 credits in California and 2000 credits in State B (a state with an applicable production volume that is half that of California). If that same manufacturer had 4000 credits in State B and it chose to travel all 4000 credits, it would end up with 2000 credits in State B and 4000 in California.​
Starting with the 2018 MY, only FCEV credits will travel, so we will likely start seeing more discounting on the Bolt in other ZEV States since they will not be able to travel CA sales and must meet volume requirements by sales outside of CA (but still in the S177 States)

Bottom line is they can use CA sales to comply with volume requirements in ALL of the ZEV/S177 States, so no need to heavily discount anywhere but CA for the 2017 MY

Probably more than most want to know can be found here:
https://www.arb.ca.gov/msprog/zevprog/zevtutorial/zev_tutorial_webcast.pdf
and here:
https://www.arb.ca.gov/msprog/zevprog/zevtutorial/zev_tutorial_questions_and_answers_jun2016.pdf
 

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ZEV credits are based on Model Year, not the calendar year.

They can count 2017 Bolts delivered thru as late as June. The exceptions are for CT, ME and RI (data from those states is due no later than May 1) and OR (data due Sept 1 with no specified delivery period).

The restructuring of ZEV credits is why we are seeing heavy discounting by GM in CA. The travelling rules are very complex, but they can utilize ZEV credits earned in CA to the "S177" (Section 177) states without actually decresing their CA credit balance. If, however, they want to use 177 credits in CA, their "bank" in the State/Region they transfer d=credits from will be decreased by a proportional amount.
For example: If a manufacturer had 4000 credits in California, and chose to travel all 4000 credits, it would end up with 4000 credits in California and 2000 credits in State B (a state with an applicable production volume that is half that of California). If that same manufacturer had 4000 credits in State B and it chose to travel all 4000 credits, it would end up with 2000 credits in State B and 4000 in California.​
Starting with the 2018 MY, only FCEV credits will travel, so we will likely start seeing more discounting on the Bolt in other ZEV States since they will not be able to travel CA sales and must meet volume requirements by sales outside of CA (but still in the S177 States)

Bottom line is they can use CA sales to comply with volume requirements in ALL of the ZEV/S177 States, so no need to heavily discount anywhere but CA for the 2017 MY

Probably more than most want to know can be found here:
https://www.arb.ca.gov/msprog/zevprog/zevtutorial/zev_tutorial_webcast.pdf
and here:
https://www.arb.ca.gov/msprog/zevprog/zevtutorial/zev_tutorial_questions_and_answers_jun2016.pdf
Not sure about other states, but MD discounts are fairly hefty right now. $5,500 off MSRP before any negotiating or conditional incentives. GM must be dangling some dealer cash to dealers to motivate them to move Bolts.

Toss in the fact all Chevys nationwide are eligible for GM employee pricing, and even sales in the podunk non-CARB states will probably be good this month.

Even if GM doesn't need to sell all 2017s by the end of the year to max ZEV credits, the possible early killing of the fed credit by the GOP gives them enough incentive to get lots of Bolts moved this month.
 

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You know, discounting, credits and all the other schemes don't really matter if you either can't find people that want to buy the car, or people just have no idea about the car. There are many people that just don't want a Bolt at any price. There are others that might want one, but have no clue. If GM really wants to "blow em' out" this month and up the sales, they are going to have to make an effort to advertise.
 

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You know, discounting, credits and all the other schemes don't really matter if you either can't find people that want to buy the car, or people just have no idea about the car. There are many people that just don't want a Bolt at any price. There are others that might want one, but have no clue. If GM really wants to "blow em' out" this month and up the sales, they are going to have to make an effort to advertise.
Word of mouth is spreading nicely. Bolts are already selling out in CA. I think GM is selling just as many Bolts as it wants to sell at this point.
 
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