GM’s Battery Gambit

Quick take

• GM is already the largest EV-battery cell maker in North America and targets a further $30/kWh cost cut in 2025 via cheaper LFP chemistry.

• Average global pack prices fell to $115/kWh last year, so GM is chasing a sub-$90/kWh landed cost once federal incentives are layered in.

• A new $3.5 bn Samsung SDI JV plant in Indiana (27 GWh, expandable to 36 GWh) should come online in 2027, lifting GM’s planned North-American capacity above 160 GWh mid-decade.

• The Inflation Reduction Act still offers up to $45/kWh in 45X manufacturing credits, cushioning early-stage margins even if consumer EV tax breaks get watered down.

• Q1 2025 GM EV sales jumped 97 % Y/Y to 31,886 units, giving it roughly 10 % of the U.S. BEV market.

Why the sudden urgency?

China currently accounts for ≈ 80 % of global battery-cell output and dominates cathode material refining. Washington’s latest tariff salvo risks inflating cell costs by 25–35 %, so localising the supply chain is now a strategic necessity rather than an ESG talking point.

Europe’s cautionary tale underscores the stakes: Swedish champion Northvolt filed for bankruptcy in November, blowing a $1 bn-plus hole in investors’ pockets and halting one of the region’s flagship gigafactory projects. GM clearly wants to avoid that fate — and seize market share while European rivals regroup.

The numbers that matter

Metric	2024	2025 target	My read
Average li-ion pack cost (global)	$115/kWh (BloombergNEF)	≤ $85/kWh (GM implied post-cut)	On par with BloombergNEF’s “parity” scenario
GM cell + pack cost delta	—	–$30/kWh (Financial Times)	LFP switch is doing the heavy lifting
Silverado EV price benefit	—	–$6 k per truck (GMAuthority)	Brings the work-truck spec closer to ICE parity
Planned NA cell capacity	≈ 100 GWh (Ohio + Tennessee)	> 160 GWh mid-decade (Battery Tech Online)	Roughly 1.6 m 100 kWh packs p.a.

MY TAKE

1. Chemistry trumps scale — for now. LFP’s cost advantage (~20 % cheaper cathode) more than offsets its lower energy density in mass-market SUVs and pickups where floor-pan space isn’t constrained. GM’s move mirrors Tesla’s Chinese Model Y playbook, signalling that nickel-rich chemistries will be reserved for Cadillac-level margins.

2. IRA credits buy time, not eternal margins. The $45/kWh 45X incentive equates to c.$4,500 on a 100 kWh pack, enough to swing GM’s first-generation EVs into breakeven territory even if raw-material prices rebound. But the credit tap phases down after 2030, so sustained cost leadership is still essential.

3. Supply-chain risk is the elephant. LFP cathodes rely heavily on Chinese-controlled iron phosphate precursors and patents. Licensing deals with CATL or TDK would expose GM to the very geopolitical choke-point it wants to escape. Unless U.S. or Korean partners can scale a domestic LFP cathode line before 2027, GM’s “seize leadership” mantra stays aspirational.

4. Valuation lens. At ~8× forward EPS GM screens cheap, yet EV losses and ICE compliance costs will keep FCF patchy until 2026. The Indiana JV is cap-ex heavy (GM share ≈ $1.75 bn), but incremental EBITDA could be > $600 m p.a. once fully ramped if pack ASPs settle near $90/kWh. That’s a respectable 8 % un-levered yield.

5. Watch the learning curve. BloombergNEF pegs global pack prices falling ~16 % CAGR when volume doubles. If GM hits 160 GWh and pulls another 15 % cost out by 2027 (solid-state or LMFP shift), a sub-$70/kWh pack is plausible — the rough point at which full-size EV trucks undercut ICE twins on total cost of ownership without credits.

Risks & red flags

• Policy whiplash: Congressional moves to claw back consumer EV credits could stall demand just as GM ramps capacity.

• Technology hedging: Prismatic LFP is flavour-of-the-month, but if solid-state or sodium-ion leapfrog before 2030, recent investments risk obsolescence.

• Partner concentration: Diversifying away from LGES to Samsung SDI helps, yet both firms remain Korea-centred; geopolitical events on the peninsula could bite.

• Europe’s collapse echo: Northvolt’s bankruptcy shows how quickly capital-intensive battery ventures can unravel if yields and scrap rates disappoint.

Bottom line

GM is executing the right strategic pivots — chemistry diversification, localised plants, and IRA monetisation — but true “leadership” hinges on cathode independence. I’m cautiously optimistic: hitting the promised $30/kWh cut would narrow GM’s EV gross-margin gap with Tesla to single digits, giving it optionality to price for share or profit. For now, I keep GM on my watch-list rather than my model portfolio, awaiting concrete evidence of a North-American LFP cathode supply chain.