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The Street
The Street
Luc Olinga

GM Copies Tesla and Rivian But Risks Angering Consumers

General Motors (GM) was patient but finally decided to react. 

The Detroit giant is confronted, like its rivals, with disruptions linked to supply chains, the chip shortage and the soaring prices of raw materials, such as nickel, but had first waited before reacting. 

Its rivals, like Tesla (TSLA), have not hesitated to act quickly in order to preserve their margins and avoid completely bearing the rising costs of assembling their vehicles. In addition, the demand for cars -- gasoline cars as well as electric vehicles -- remains strong. The car manufacturers' order books are full. Consumers have thus seen the delivery times for their vehicles lengthen. This is as true for sedans as it is for pickups/trucks.

GM has finally decided to follow its competitors by increasing the price of the GMC Hummer EV pickup, the electric version of its iconic Hummer truck. 

The price of the Hummer EV has increased by $6,250 since June 18 and for all subsequent orders after that date, GM said. All orders placed before June 18 are not affected. The company hopes that this price increase will allow it to offset the high costs of raw materials and those of transport.

The Hummer EV is initially available in a top-of-the-line $110,295 model, Edition 1, but GM is offering three cheaper variants with starting price at $80,000, $90,000 and $100,000. We must now add the new price increase.

Backlash

As of now, the reservations totaled more than 77,500 units for electric GMC Hummer pickups and SUVs. The Hummer EV pickup will be followed by the Hummer EV SUV in 2023. The reservations for the first model, Hummer EV SUV Edition 1, with a starting price at $105,595, are full, according to GM. There are three variants with starting price at $80,000.

“Everything is on the table when it comes to the way we have to be thinking about some of these commodities that might be in tighter supply in the future," GM Chief Financial Officer Paul Jacobson said at a conference organized by Deutsche Bank on June 15. 

"We’re thinking really creative, because what we can’t do is limit ourselves to the way business has always been done with some of these trends in the future.”

Jacobson also said that GM has been able to offset $5 billion in higher supply chain costs by raising prices and cutting expenses.

The Hummer EV's main rivals are Rivian's (RIVN) R1T pickup, Ford's (F) F-150 Lightning, and Tesla's Cybertruck. Tesla is going to start the production of the Cybertruck in 2023. 

When Rivian raised the price of its electric pickup truck R1T by 17% and its SUV R1S by 20% in February due to material costs and the ongoing chip shortage, the automaker caused an uproar from its customers. To avoid order cancellations, Rivian had been forced to forgo price increases for orders placed prior to its decision.

"We announced pricing increases that broke the trust we have worked to build with you," said chief executive officer RJ Scaringe at the time. "We wrongly decided to make these changes apply to all future deliveries, including pre-existing configured preorders."

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