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General Motors Is Getting Into the Energy Business

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Image: General Motors

General Motors sees EVs as a solution to our increasing energy demands, Hyundai and Ford are catching up to Tesla and the European Commission might finally stop dragging its feet over ever-stringent internal-combustion emissions rules. All that and more in this Tuesday edition of The Morning Shift for October 11, 2022.

1st Gear: Meet Ultium Home

Electric vehicles may put a strain on the power grid, but they also have the potential to benefit it, thanks to bidirectional charging. The General, like many others, wants to take advantage of this, and is doing so with new initiatives called Ultium Home and Ultium Commercial under a new corporate unit titled GM Energy announced Tuesday. From Automotive News:

Ultium Home and Commercial will offer products and services that enable bi-directional charging, allowing an EV to draw power from an electrical service or send excess power back to utilities and perhaps receive compensation.

“If you’re a customer and allow GM Energy to access, say, 10 percent of your battery on an as-needed basis we can move that energy around,” Hester said.

In addition, GM Energy will provide solar and stationary energy storage products, and will be compatible with fuel cells. The hardware is supported by software and management tools that are part of GM’s Energy Services Cloud, according to GM.

The company says it has already enrolled EV customers in charging programs through its Energy Services Cloud, the result of work with multiple utility companies in four U.S. states. Several firms already have been working with GM Energy or agreed to work with the business unit.

Image for article titled General Motors Is Getting Into the Energy Business

Graphic: General Motors

The key to this will be support from local utility firms. To that end, GM is working with the likes of Con Edison, Graniterock and Pacific Gas and Electric. The Ultium Home portion of the service is planned to launch alongside the 2024 Silverado EV.

The intent is for these solutions to ease the burden on utilities as EV adoption grows and strengthen the grid when power is needed, Hester said.

“GM has been pretty overt in saying that we think we’re going to have a million customers driving EVs by 2025,” he said. The Chevrolet Silverado will have a 200-kilowatt battery. “You multiply that by a million units and that’s more capacity anybody would need at any given time,” Hester said.

On the receiving end, GM Energy’s storage devices will allow EV owners to purchase energy when it is less expensive and save it.

“When there’s a local blackout and you can’t run your business or your home, the stationary storage devices can supplement and run them,” Hester said.

“That’s when utilities can lean on us,” he said. “We can take percentages of all of those battery assets, aggregate it and push power back to the utilities.”

GM quietly started one vehicle-to-home backup power pilot program with PG&E in California earlier this year, that figures to be a preview of what’s to come. The automaker is also working closely with SunPower to handle home installations, and add on solar roofing if desired. Much of the media is painting GM Energy as an “answer” to Tesla’s Powerwall and solar services, but GM surely won’t be the last to enter the space. Car companies sort of evolved into tech companies, and next they’ll become energy companies.

2nd Gear: Hyundai and Ford Looking Good

Since we brought up Tesla, though, we may as well discuss how other legacy brands are gaining some ground against the EV leader in North America. Which isn’t surprising, really — it was only a matter of time before established carmakers began producing better products, allowing them to chip away at Tesla’s market share. Hyundai and Ford in particular have capped promising quarters, trading blows over the No. 2 spot. Again, Automotive News:

Through August, the South Korean automaker reported 43,072 new registrations of electric vehicles across its Kia, Hyundai and Genesis brands — accounting for a combined 9.4 percent share, according to data from Experian Automotive.

For the same period, Ford reported 33,354 new registrations, or 7.3 percent, share, powered by strong demand for the Mustang Mach-E.

The electric crossover reported 25,596 registrations — making it the third best-selling EV in the U.S.

The three Hyundai brands represent a formidable new competitor, with ambitions to bring four new EVs to the U.S. by the end of next year.

EV industry analyst Sam Abuelsamid noted that Hyundai Motor Group has had the advantage of more models available in higher volumes through most of this year.

“The Lightning didn’t start shipping in significant volume until July, and Ford is still facing a variety of production constraints due to various component supplies,” said Abuelsamid, principal analyst at Guidehouse Insights.

But Ford may have a short-term advantage over the Koreans, thanks to the recently signed Inflation Reduction Act, designed to incentivize domestic EV production and reduce reliance on foreign supply chains.

And that last part right there is the rub for Hyundai, and why they’re desperately trying to delay the Inflation Reduction Act’s domestic manufacturing requirement as long as possible. Losing a free $7,500 on the Hyundai Ioniq 5 and Kia EV6 that Ford and Tesla get is not going to help the Korean automaker’s position in this race. I suppose the silver lining is that either way, people really seem to dig their products.

3rd Gear: The Energy Crisis Comes for Carmaking

A looming energy crisis for the coming winter has Europe concerned for a whole host of reasons — not the least of which, the ability to stay warm. It’s small potatoes by comparison, but auto manufacturing is expected to endure a steep decline as a result, too. From Reuters:

Auto forecaster S&P Global Mobility warned on Tuesday that, under a worst case scenario, Europe’s energy crisis could cut its car production by close to 40%, or more than 1 million vehicles, per quarter through the end of 2023.

In a report titled ‘Winter is Coming,’ S&P Global Mobility said the auto industry’s supply chain – already reeling from the COVID-19 pandemic and Russia’s invasion of Ukraine – “may face extensive pressure” from soaring energy costs or even power cuts.

“With energy prices in Europe skyrocketing… a harsh winter could place certain automotive sectors at risk of being unable to keep their production lines running,” the report said.

S&P Global Mobility said costs had already escalated for car production, to between 687 euros ($667) and 773 euros per vehicle, up from a pre-energy crisis level of 50 euros, putting strain on smaller suppliers in particular.

The coming weeks are going to be extremely telling, but even those who manage to weather the storm this impending season won’t be in the clear yet if they don’t take the appropriate measures before next year.

While automotive powerhouse Germany has relied on Russian gas and is phasing out nuclear power, it has “more budgetary headroom to ride out the energy storm” than some other European countries including Italy, it said.

[Edwin] Pope [S&P Global Mobility principal analyst for materials and lightweighting] said while the auto industry might be able to struggle through this winter, if Europe did not have a plan in place for the following winter then many suppliers might not survive.

“I’m worried we’ll have some highly-skilled craftsman shops in the region either go through forced bankruptcy or just hang up their hats,” Pope said.

4th Gear: Chart Course for Euro 7

Euro 7, the European Union’s next phase of increasingly stringent emissions regulations, will likely kick in over the next five years. But a final implementation plan has not been ratified yet, having been kicked down the curb for months throughout 2022. It might come to pass next week, or the week after that. Courtesy Automotive News Europe:

After repeated delays, the European Commission is expected to adopt the Euro 7 tailpipe pollution regulations this month.

The regulations will further limit emissions of harmful pollutants such as fine particulates, hydrocarbons and carbon monoxide from gasoline and diesel cars and trucks, and would replace the existing Euro 6 regulations, in place since 2014.

Euro 7 is likely to be the defining pollution parameters for the final generation of combustion engines in Europe, with the EU planning to allow only zero-emissions vehicles to be sold after 2035.

The most recent postponement of adoption was from Oct. 12 to Oct. 26 “or sooner,” the Commission said Tuesday. It had been planned for July 20, which itself was pushed back from April 5 — and from the fourth quarter of 2021 before that.

After the European Commission adopts the rules, a “co-decision” process will decide the final form and implementation process. They are likely to come into force no earlier than 2025 — and potentially even a year or two later, sources said at a meeting in Brussels last month of the Association for Emissions Control by Catalyst.

The impending policies are certainly going to raise the cost of internal combustion vehicles, particularly at lower profit margins. They’ve had the effect of driving carmakers to prioritize EVs more quickly than they likely would have otherwise, even those in the industry will admit:

“We are not overly convinced of the benefits of Euro 7,” said Paul Greening, Emissions and Fuels director at the automakers’ group ACEA, at the Brussels event. Both CO2 targets and Euro 7 are drivers for zero emissions, he said.

In a likely scenario, Euro 7 rules would apply to a single generation of models starting about 2026, but by 2035 only a tiny percentage of new cars would still be launched with gasoline or diesel powertrains.

With many automakers already announcing plans to launch only zero emission vehicles by 2030, a large investment in Euro 7 “does not make sense,” Greening in response to a question at the Brussels event.

“The reality of investing in Euro 7 for a short return, and in a very difficult business market at the moment, with many pressures on the industry, is becoming more complex,” he said.

5th Gear: CATL

If you could be anyone right now, you’d want to be battery supplier CATL. The company is absolutely raking it in thanks to increased production of EVs, partnerships with damn near everyone and a supply chain that is slowly easing up. Slowly. Net profit is on track to be triple what it was across the same July-to-September period in 2021, per Reuters:

CATL, a Chinese electric vehicle (EV) battery giant, forecast its net profit in the July-September quarter to nearly triple from a year-ago period, buoyed by rapid expansion in production to power the growth of EVs worldwide.

The company is the world’s biggest battery maker and accounts for more than a third of global EV battery sales.

CATL, a supplier to U.S. carmaker Tesla Inc, expects its third-quarter net profit to increase to between 8.8 billion yuan ($1.23 billion) and 9.9 billion yuan, up from 3.3 billion yuan last year, CATL said in a stock exchange filing late Monday.

It expects net profit for the first nine months of the year to more than double from a year-ago period.

“The company … has ramped efforts in market expansion in addition to the capacity planned earlier,” CATL said in the filing. “Production and sales significantly increased, which helped to secure its persistently leading position in the global market and result in the rapid profit growth.”

CATL has accelerated its expansion into overseas markets with contracts to supply batteries to major carmakers including Mercedes Benz Group and BMW in Europe and Ford Motor Co in the United States, where government incentives are driving demand for EVs.

Time has the story of how CATL got to be where it is today, and it’s an interesting short read. Much of it had to Western manufacturing’s failure to recognize or invest in future technologies. What a surprise.

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