By Daubkov and Kaniuki, CNN
(CNN) — There are mixed feelings within the automobile industry about General Motors’ decision to invest $5 billion in new electric vehicles.
The investments are part of a broader bid by the company to transform itself into a more technology-focused automaker by 2030.
“This is the future of GM and the future of the auto industry, and will make a global impact,” CEO Mary Barra said Thursday.
GM is even producing an electric car of its own. Its Cruise electric concept is just a concept car now, but the automaker hopes to be selling a production version next year.
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The company also plans to invest in more plug-in hybrids, including a brand new Cadillac concept electric car that debuted on Thursday.
By spending $5 billion, Barra hopes to become the leader in electric vehicles and autonomous vehicle development by 2030. That’s when she aims to have around 500,000 electric vehicles on the road, about 25% of all vehicles produced in the United States.
General Motors has already sold over 350,000 pure electric vehicles, or more than 3% of its fleet sales in 2018.
But electric vehicles like the Chevrolet Bolt are far from mainstream. In August, consumer demand for electric vehicles was about 2.5% of all new vehicles sold, according to J.D. Power. And consumer demand for battery electric vehicles was about 8%.
By contrast, more than 60% of the vehicles sold in the United States last month were conventional gas-powered vehicles.
But consumers have warmed to EVs in recent years, and the U.S. government has proposed a 20% increase in the federal tax credit for electric vehicles. That’s an effort to help sales of battery electric vehicles, but so far it’s not having much impact.
GM has emphasized the new technology, but is also trying to sell customers on the practicality of its existing electric vehicles.
About 23% of GM’s U.S. sales last month were from its EV lineup, up from 17% in August.
The big question is whether GM will succeed in the quest to become a technology leader.
Tesla has had tremendous success getting customers interested in its electric vehicles. But its balance sheet is more than $10 billion in debt. It recently reported an $839 million quarterly loss and is sinking into deeper losses every quarter.
Tesla has tried to cut costs by furloughing its salaried employees for five weeks last quarter.
Other companies have also made big investments in self-driving technology, and all have encountered challenges.
Waymo, the self-driving vehicle division of Alphabet, has gone through at least three chief executives over the past two years, and hasn’t made a profit since its inception in 2009.
And General Motors did everything it could to squash Uber’s self-driving-car efforts, suing Uber for stealing its trade secrets and driving the two companies into a massive legal battle.
GM just also lost its chief financial officer, Chuck Stevens, to the Silicon Valley upstart Slack, which is also looking for a chief financial officer.
Here’s a look at the wide range of opinions about GM’s investment.
Venture capitalist Bill Gurley said it’ll probably work out:
“GM has 1/3 of the cost of Tesla’s cars, a bigger fleet, and a fully-developed battery plan that delivers like many EVs. Stay tuned, and bet on GM.”
J.D. Power says it could be a disaster:
“Yes, this could be a disaster. But the plan does signal that both the company and the US government have given up on the traditional internal combustion engine. Look for more efforts to bring a cleaner, greener EV to market, and don’t underestimate the pull GM could have on the industry. At the end of the day, GM has proven it is a disruptor and it’s time for the world to stand up and follow.”
Mark McGettrick, president of Santa Monica-based Automotive Equities Capital, said electric vehicles won’t gain mainstream acceptance in the United States for another decade:
“It is unclear why in 2020 the world can’t be built around electric vehicles, especially when your biggest cost is probably gas. But it will not happen in the U.S. in the short term, even with a steep drop in gas prices. Electric vehicles take a long time to gain traction.”