GM May Be Cutting a Battery Plant. What That Means for Its EV Spending.

Text size

General Motors

has plans to be a big seller of electric vehicles, but it could be scaling back its capital investments in the area.

The Wall Street Journal reported Friday that GM (ticker: GM) and battery partner

LG Energy Solution

(373220. Korea) are scrapping plans for a fourth U.S. EV battery factory.

The cancellation, which would be a surprise to GM investors, is especially important because it isn’t clear where else in its EV operation GM would put to work the billions of dollars it would save by not building that plant. The upshot could be an overall reduction in outlays.

Building more more factories to build additional EVs wouldn’t make sense because without the extra battery output, those new car plants would be reliant on third parties for their most important component.

That would put those plants at a competitive disadvantage and mark a setback for GM in its effort to make EVs as profitable as its traditional car business by 2025. The company wants to be selling roughly 1 million EVs a year in North America by then.

Lower-cost batteries are essential for meeting the profitability goal. Controlling its own battery capacity, keeping as much production in-house as possible in cooperation with

LG
,
is key to getting costs down.

GM stock closed down 1.1% at $35.35, off about 2% from their daily high. The

S&P 500
and

Dow Jones Industrial Average
closed up 1.9% and 1%, respectively.

EV spending is closely tracked by investors. The stock might not have reacted more because a fourth plant is far in the future, beyond the current concerns of investors. GM currently has one battery plant, built with LG, ramping up production in Ohio. Plants are slated to open in Tennessee and Michigan in 2023 and 2024, respectively.

Those plants should produce enough batteries to make 400,000 EVs a year by 2024.

“We expect to have cell capacity to produce more than 1 million EVs annually in North America in 2025,” said a company spokesman in an emailed statement. “We’ve been very clear that our plan includes investing in a fourth U.S. cell plant, but we’re not going to comment on speculation.”

That’s another reason the stock didn’t move greatly. The decision to cancel plant four hasn’t been announced or confirmed.

GM delivered more than 39,000 EVs in the U.S. in 2022. It delivered more than 400,000 in China with partner

SAIC Motor
.

GM stock is up 5.1% so so far this year, rebounding after a slide of about 43% in 2022. Rising interest rates and the declining affordability of new cars hurt investor sentiment over the course of the past year.

Write to Al Root at [email protected]