Global warming sucks. Need I say more [3]?<\/p>\n
The automotive industry is moving towards electrification, with the US electric vehicle (\u201cEV\u201d) market growing at a 32% CAGR between 2012-2016, approaching 40% in 2017; if this is maintained for the next six years, EVs will represent ~10% of US vehicle sales by 2023 [4]. From the below graph showing YTD sales of EVs in 2017, we see that numerous automakers are well-aware of this trend and are actively moving the industry, whereas government regulation is lagging, a welcome change for the industry [5] [6].<\/p>\n
Management\u2019s short-term actions (and implications)<\/strong><\/p>\n GM produced 11 vehicle models with some form of electrification to date, including the Chevrolet Bolt EV, which is the current 2017 Motor Trend Car of the Year, getting ~240 miles on a charge [2]. The company is continuously innovating towards a lower-carbon future in the near term, going beyond EV reliance, but also finding other ways to maximize output per given unit of energy input \u2013 both through internal initiatives such as \u201clightweighting\u201d which cut 3,600 pounds across 10 vehicles across the product line, as well as through pseudo-inorganic means, which led to the formation of Maven, the company\u2019s car-sharing service, which transported riders 4.2mm miles driven in the first seven months after launch [7].<\/p>\n Clearly, in the short run, GMs management is all over this; they also have incentivized key managers to stay on top of these trends by linking environmental performance with compensation [2]. However, management needs to be wary of competitors in the EV market (see the numerous brands in the above graph), as well as incoming new entrants such as Volvo, who have announced that by 2019, every car launched will have an electric motor [8]. As the price of battery and EV production decrease with improving technologies [9], as well as the eventual removal of government instituted subsidies for EV vehicles, management should be wary of erosion of their leading market position. As such, simply producing EV vehicles may not be sufficient in the short-term; GM must continuously improve and move down the production curve, both in terms of efficiency in producing more units, as well as sourcing lower cost inputs (resulting in a lower sticker price for customers once these protections are removed). Considerations should also be taken with respect to the location of future manufacturing locations in the name of environmentalism, depending on their proximity to the end user; and who that customer of the future may be \u2013 more on that to come.<\/p>\n \u00a0 Management\u2019s medium (to long)-term actions (and implications)<\/strong><\/p>\n This is where things get interesting.<\/p>\n Extrapolating environmental consciousness trends to the consumer out to 2030 results in a decrease in private ownership of vehicles, dropping by 80% by 2030 in the US, while electric ride shares will be 4.0-10.0x cheaper<\/em> than buying a new car by 2021 [10]. Cars sold in the US sit idle for more than 95% of the time, an extremely wasteful proposition [11]. Reconciling this with GM\u2019s commitment to environmental initiatives means fewer cars on the road \u2013 a problem if you are in the business of selling cars.<\/p>\n Naturally, GM requires a fundamental business shift going forward. Acquiring companies such as Strobe (laser-radar technology) [12] and Cruise Automation (automated driving) [13], GM has plunged headfirst into the world of autonomous vehicles, and by using an EV Bolt as a starting base [14], GM fleets are being tested across the nation, in an attempt to be the leading provider of vehicles that will shape urban transportation.<\/p>\n Extrapolating this out a decade, if\/once safety, regulatory, and ethical kinks are worked out, and autonomous EVs are commonplace (a big if), GM\u2019s supply chain will have to be completely inverted. No longer are they manufacturing for the individual, but rather for a city, county, or public entity; and once enough vehicles are on the road to satisfy the government entities constituents, there will be no more need for factories; no more need for new models released each year. Rather GM will have to reorganize its supply chain as one of a service company \u2013 providing maintenance for existing vehicles, offering support (advertisements, food, movies, phone, internet?) to riders as a part of the service, but occasionally, maybe the new model of autonomous vehicle, as after all, they still are General Motors.<\/p>\n Food for thought:<\/strong><\/p>\n \u00a0<\/strong><\/p>\n (Word Count: 799)<\/p>\n __<\/p>\n <\/p>\n [1] \u201cGeneral Motors commits to 100% renewable energy by 2050,\u201d http:\/\/www.gm.com\/mol\/gm-commits-to-renewable-energy.html<\/a>.<\/p>\n <\/p>\n [2] \u201cGM 2016 Sustainability Report,\u201d http:\/\/www.gmsustainability.com\/_pdf\/landing\/highlights.pdf<\/a>.<\/p>\n <\/p>\n [3] \u201cGlobal Warming: Feature Articles,\u201d NASA, http:\/\/earthobservatory.nasa.gov\/Features\/GlobalWarming\/page2.php<\/a>.<\/p>\n <\/p>\n [4] Lambert, Fred. \u201cElectric Car Sales Reach 40% Growth in the US and It\u2019s about to Blow Up,\u201d Electrek, https:\/\/electrek.co\/2017\/07\/21\/electric-car-sales-us\/<\/a>.<\/p>\n <\/p>\n [5] Schmitt, B. \u201cGermany\u2019s Bundesrat Resolves End Of Internal Combustion Engine,\u201d Forbes (2016) https:\/\/www.forbes.com\/sites\/bertelschmitt\/2016\/10\/08\/germanys-bundesrat-resolves-end-of-internal-combustion-engine\/#84cdaad60bd8<\/a><\/p>\n <\/p>\n [6] Condliffe, J. \u201cChina and India Want All New Cars to Be Electric,\u201d MIT Technology Review (2017) https:\/\/www.technologyreview.com\/the-download\/608839\/china-and-india-want-all-new-cars-to-be-electric\/<\/a><\/p>\n <\/p>\n [7] Etherington, Darrell. \u201cHow GM\u2019s Maven Car Sharing Service Got to over 4.2M Miles Driven in 7 Months,\u201d TechCrunch, 24 Aug. 2016, https:\/\/techcrunch.com\/2016\/08\/24\/how-gms-maven-car-sharing-service-got-to-over-4-2m-miles-driven-in-7-months\/<\/a>.<\/p>\n <\/p>\n [8] \u201cVolvo Cars to go all electric\u201d, Volvo, https:\/\/www.media.volvocars.com\/us\/en-us\/media\/pressreleases\/210058\/volvo-cars-to-go-all-electric<\/a>.<\/p>\n <\/p>\n [9] \u201cAccelerating US Leadership in Electric Vehicles (2017),\u201d Union of Concerned Scientists, www.ucsusa.org\/accelerating-us-leadership-electric-vehicles-2017<\/a>.<\/p>\n <\/p>\n [10] Arbib, James, and Tony Seba. \u201cRethinking Transportation 2020-2030,\u201d https:\/\/static1.squarespace.com\/static\/585c3439be65942f022bbf9b\/t\/591a2e4be6f2e1c13df930c5\/1494888038959\/RethinkX+Report_051517.pdf<\/a>.<\/p>\n <\/p>\n [11] Morriz, David Z. \u201cWant to Know Why Uber and Automation Really Matter? Here’s Your Answer,\u201d Fortune, 13 Mar. 2016, https:\/\/fortune.com\/2016\/03\/13\/cars-parked-95-percent-of-time\/<\/a>.<\/p>\n <\/p>\n [12] Felton, Ryan. \u201cGM’s Gearing Up To Dominate The Self-Driving Car Industry.\u201d Jalopnik, 9 Oct. 2017, https:\/\/jalopnik.com\/gms-gearing-up-to-dominate-the-self-driving-car-industr-1819280778<\/a>.<\/p>\n <\/p>\n [13] Wayland, Michael. \u201cGM Lets Its Autonomous Unit Be Autonomous.\u201d Automotive News, www.autonews.com\/article\/20170619\/MOBILITY\/170619761\/gm-cruise-automation-relationship<\/a>.<\/p>\n <\/p>\n![\"\"](\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2017\/11\/x.jpg\")
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