G.M. and the Electric-Car Comeback
The plan by G.M.’s. chairman and chief executive, Mary Barra, will also mean big changes for auto design and manufacturing, and for the auto supply chain. Suppliers must now pivot away even more intently from making traditional transmissions and engines to producing the advanced batteries, motors and power systems electric vehicles need. And car dealers, after years of pushing gas-guzzling sport utility vehicles, must now aggressively market electric cars to consumers.
Phasing out the gas-powered cars and trucks that many people drive will cause demand for gasoline to drop steadily over the next few decades, cutting into oil and gas industry profits. Gasoline is the most consumed petroleum product in the United States, with light-duty vehicles accounting for more than 65 percent of total on-road fuel consumption. If medium- and heavy-duty trucks that burn diesel also transition to lower-polluting fuels, demand for oil will drop further. In the short term, the oil and gas industry can absorb lower demand for certain petroleum products, but in the long term, it will need to rethink its business model.
Politically, G.M.’s pledge also further isolates the U.S. oil and gas industry, which has, on the whole, been too slow and reactive on climate change. Corporate leaders across the economy increasingly recognize that climate change requires a societal response and are positioning their companies to be part of the solution. Investors, employees and others seeking to slow global warming will demand as much.
Strikingly, G.M.’s announcement comes at a time of low oil and gasoline prices — there’s no market pressure on consumers to buy efficient cars. Indeed, after a decade of rapid growth, the share of electric vehicles in the global car market is still only around 3 percent. But the price of electric cars is falling. Their design is improving, and anxiety over the distance they can travel is receding, so the difference between buying an electric car and a gas-powered car will shrink. G.M. knows this and is counting on it.
Ms. Barra’s strategic bet is that consumers can be persuaded to love electric alternatives the way they already love their gasoline-powered Tahoes, Suburbans and Trailblazers. (Tesla has proved that electric vehicles can be exciting, even for those who don’t care about climate change. No wonder its market value is soaring.) By 2025, G.M. will introduce 30 all-electric vehicle models worldwide, and 40 percent of its U.S. models are projected to be zero-emission. Electric vehicles will also be more affordable and cost-effective over time, thanks to declining initial costs and fuel savings.