Swiss Financial Giant UBS Tears Down Chevy Bolt For Analysis


JUN 5 2017 BY EVANNEX 51


Chevy Bolt


Another influential voice has joined the chorus predicting that electric vehicles (EVs) will soon disrupt the global auto industry. A team from financial giant UBS took apart a Chevy Bolt and published an in-depth cost analysis of the new vehicle (details). However, its report went much further, making some bold predictions about the future of the automotive market.

*This article comes to us courtesy of Evannex (which also makes aftermarket Tesla accessories). Authored by Matt Pressman.

The immediate purpose of the exercise was of course to estimate GM’s cost to build the $37,000 vehicle. UBS said that the Bolt’s electric powertrain is $4,600 cheaper to produce than it previously estimated, “with much cost reduction potential left.” However, GM is still selling the Bolt at a loss. “We estimate that GM loses $7,400 in earnings before interest and tax on every Bolt sold today, mainly due to a lack of scale,” wrote UBS’s analysts.


UBS estimates how much GM loses on the Chevy Bolt (Image: UBS)

This figure is just a bit less than what other industry observers have estimated. As Elon Musk and others have explained, through the convoluted math of California’s zero-emission vehicle (ZEV) program, GM earns credits that offset its losses on sales of the Bolt, but has no incentive to sell more than about 30,000 units per year. However, UBS’s findings imply that, if GM could squeeze out some costs and increase the scale of production, it could be earning a profit on the Bolt before long.


The team at UBS tears down a Chevy Bolt (Image: UBS)

UBS extrapolated its findings about Bolt production costs to make a portentous prophecy: EVs will prove to be “the most disruptive car category since the Model T Ford.” The company predicts that “total cost of consumer ownership can reach parity with combustion engines from 2018.” EVs will still carry higher sticker prices, but when the savings on fuel and maintenance are considered, they will be cheaper. UBS expects this price parity to be reached first in Europe, where gas prices are higher, and in the US several years later.

“This will create an inflexion point for demand,” said the UBS analysts. This is surely the understatement of the year. A UBS survey of 10,000 consumers found that it was the high price of EVs, not fear of the technology, that prevented people from buying. And the ever-growing waiting list for Tesla’s Model 3 indicates that there is plenty of pent-up demand for EVs. Once the price barrier is breached, a tidal wave of disruption could sweep the industry. UBS has raised its forecast for EV sales in 2025 to 14.2 million – 14% of global car sales. It also predicts that automakers will start earning a profit of about 5% on EVs by 2023, equivalent to today’s average profit margin.


UBS forecasts electric vehicle sales by region through 2025 (Image: UBS)

UBS notes that the effects will be felt in related industries as well. It predicts a boom in battery materials such as lithium, cobalt and rare earths. Growing demand will lead to higher prices, spurring “transformative industry growth.” No, there’s not going to be a catastrophic shortage of lithium. According to UBS, “Only cobalt faces the issue of limited reserves, whereas for the other materials, current production capacity is the only bottleneck.”


A Chevrolet Bolt battery pack in General Motors Global Battery Systems Laboratory at the GM Technical Center in Warren, Michigan. (Photo by Jeffrey Sauger for General Motors)

Good news for mineral producers, bad news for makers of replacement parts. “Our detailed analysis of moving and wearing parts has shown that the highly lucrative spare parts business should shrink by 60% in the end-game of a 100% EV world, which is decades away,” UBS said (without explaining why the transition will take decades).


Stephen Poulos, Global Chief Engineer, Electrification, with a Chevrolet Bolt EV drive unit in General Motors Global Battery Systems Laboratory at the GM Technical Center in Warren, Michigan. (Photo by Jeffrey Sauger for General Motors)

The UBS report moves on to riskier ground, extrapolating its cost analysis of Chevrolet’s apple to an orange, Tesla’s as yet undriven and unbought Model 3. The shakiness of such a metaphorical limb is obvious – the two vehicles differ in their form factors and their target markets, and the two companies couldn’t be more different. Giant GM plans to produce the Bolt in low volume, and it can write off any losses as the cost of satisfying government regulators and buying some green cred. Upstart Tesla, on the other hand, hopes to produce Model 3 in quantities of 500,000 per year for starters, and it has more or less staked its existence on being able to do so.

Above: New spy video of the Tesla Model 3 (Youtube: Northern California Dashcam)

Furthermore, as Electrek points out, most of the Bolt, including the battery cells and all the main powertrain components, comes from Korean supplier LG, whereas Tesla has become wary of relying on suppliers, and has vertically integrated the manufacturing of almost its entire powertrain – even the battery cells are produced by Panasonic at the Gigafactory, under the watchful eye of Big Brother Elon.

Tesla Gigafactory Aerial

Tesla Gigafactory Aerial – Tesla and Panasonic have teamed up to build Gigafactory 1 in Sparks, NV.

Be that as it may, UBS is confident that what it learned from the Bolt enables it to predict the profitability of Model 3. “We estimate that Tesla will require an achieved selling price of ~$41k for the upcoming Model 3 to break even. This is ~$6k above the estimated base price of $35k. As Tesla buyers are likely to order well-equipped versions (margins on the options should be ~50%), the required ~$41k threshold is likely to be well exceeded, in our view.”


Based on its Chevy Bolt teardown, UBS attempts to estimate what Tesla’s break-even selling price could be for its Model 3 (Image: UBS)

In other words, Model 3 will only be profitable if buyers spring for $6,000 worth of options, but most are likely to do so. Unsurprisingly, Tesla is more optimistic – it has been predicting a 20% gross margin on an average sale price of $42,000. Of course, the unstated assumption is that Tesla will meet its ambitious production goals. The company is counting on economies of scale and improvements in the manufacturing process to bring costs down. If the ramp-up stalls for some reason, predictions about profit margins could be out the window.


Sources: CleanTechnica, Electrek, Financial Times, Seeking Alpha

*Editor’s Note: EVANNEX, which also sells aftermarket gear for Teslas, has kindly allowed us to share some of its content with our readers. Our thanks go out to EVANNEX, Check out the site here.

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51 Comments on "Swiss Financial Giant UBS Tears Down Chevy Bolt For Analysis"

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I’m not sure how much you can trust their analysis when they state that Bolt have 60kWh battery, when it’s pretty obvious that it’s 60 usable and probably 64-65 total.

on the other hand if their motor / inverter cost are really that low I don’t understand why EVes are so much expensive

Because they want people to think they are losing money on them in order to prolong their ICE offerings !

Deutsche post is a classic example, they built their own vans after asking VW (who said no), let everyone know how cheap they were to build and run and are now in the process of selling them themselves, VW got upset because they have lost a lot of business and said they were not given the opportunity. It seems lying is their forte !


Well bless VW’s ❤️

Yes, BUU, I’ve repeatedly commented that the BOLT ev’s HUGE battery could have easily been rated at ’65 kwh’, since trickle charging it takes 67.77 kwh (at 1/10 C), and the ‘usable’ capacity I’ve seen as much over 59 kwh. This just proves the car is conservatively rated.

I like the photo here of the drivetrain cutaway: That BEEFY 1st stage helical gearing as well as substantial bearings, as well as the TOTALLY SILENT gearbox, even when under heavy loading – gives every chance that it should last years and years.

The only thing you hear is the inverter whine out of the motor winding, which is tolerable.

I find it hard to believe a bunch of engineers would open up a battery pack and then just use the marketing numbers for battery capacity when calculating a production cost. There is a picture there from the report that shows them looking at the battery.

Perhaps you should actually read their analysis:

“The Bolt’s battery pack is supplied by LG Chem. It is a latest-generation NMC
(Nickel Manganese Cobalt) battery with a usable capacity of 60kWh,”

Are EVs really “disrupting” the auto industry if every major manufacturer sells them? That’s a trend, not disruption, as the incumbents remain at the fore.

I’d ask how BMW and Mercedes feel about their high end sedan and SUV market share trend over the last few years. Tesla has been pretty disruptive to them.

“I’d ask how BMW and Mercedes feel about their high end sedan and SUV market share trend over the last few years.”

Record sales and profit years for both of them. Porsche sales have nearly doubled in the US over the last few years yet Porsche is often cited as a “victim” of Tesla sales. Porsche sales and profits have likewise been in the record numbers as Tesla has grown.

The Porche Panamera, it’s closest competitor to the Model S, sold 4,403 copies in the US in 2016, down from it’s peak of 7,614 in 2012.

Mercede’s S Class sold 18,803 last year, down from highs of 25,276 in 2014, and 30,886 in 2006.

BMW 7 Series sold 12,918 in 2016, the best in quite a few year thanks to a new model introduced late 2015, but it’s down from a peak of 22,006 back in 2002.

Tesla Model S on the other hand had record sales in 2016 with 29,156.

If you don’t think those brands are feeling the heat from Tesla then you aren’t thinking straight. Those high end sedans are feeling the pinch both from the transition to luxury SUVs and from the new FIRE that is Tesla.

The disruption will arrive when we reach the bend in the “S” curve later this year perhaps with the onset of the Model 3, Leaf 2.0 & National rollout of the Bolt ?

Yes, they are absolutely disrupting the industry. Every automaker selling them is proof.

Cellphones disrupted the communications industry. That’s not because only one company was selling them, but rather because the industry as a whole was transformed from the norm.

The same is true here; the norm has been ICE vehicles for a century, and EVs are the technology to disrupt that.

The automotive industry is more than just building cars. It includes R&D, parts manufacturers, fluids, service and fuel.

Even if the EV movie has the same actors, it’d have a very different crew to the ICEV movie.

Disruption doesn’t have to displace the incumbents, but will if the incumbents aren’t investing in the disruptive technology.

I don’t believe the analysis. It’s been stated before that GM got some nice pricing due to bundled agreements with LG for a lot of their electronics, etc.

You can tear own a Bolt or another car and know exactly what technology is in it, but there’s not a price tag on those parts. They can only estimate that portion.

I think LG is willing to take a hit on what it’s supplying as a way of announcing to other companies that it’s ready for all EV parts needs.

When 2020 rolls around, there should be some actual profits being made and booked by EV manufacturers. Once the majority of the Fedral financial incentives (tax credits) have been utilized, and proceed with being phased out, the lack of profitability of EV manufacturing, for the major legacy ICE manufacturers, will somehow mysteriously disappear. How this will transition will happen it is hard to tell. Scale and hard line supplier contracts, can bring EV costs close to overal ICE parity costs by 2020.

The Bolt would already make profit if they would sale more cars to lower R&D per car-

The main breakdown chart for the Bolt is a good one. At least we can see the indirect costs….and without the indirect costs GM makes money on each BoltEV.

Is there an assumption on the payoff time for the indirect costs? If so what is the assumption?

On the Tesla cost breakdown no indirect costs are broken out.

What (where) are Tesla’s “indirect costs?

What is “OPEX” on Tesla’s chart.

I’m going to guess OPEX is operational expenses, but that really is just a guess.

yeh other operating expense would be my guess as well.

Remember the original analysis way back when when they said GM lost 40,000$ on each Volt?

I think they paid all the indirect costs off in one year on that dumb estimate.

Where is GM’s cost of the production line manufacturing equipment buried?? Is that an “indirect” cost?

The Bolt is built on the same line as the Sonic so outside of specific dies for the Bolt frame/panels it would be little more than reprogramming the robots to switch between vehicles.

It’s also interesting how there’s no description of the options to break even for the Bolt. Is there a bias at UBS? Detail that can’t be filled in? Other?

Well, I guess if their $7.5k loss is correct, you’d need $15k of options, an amount that doesn’t exist on the Bolt.

Still, it would be nice to list a range of losses based on how well-equipped the vehicle is.

And even still, I doubt their estimates since it is based on the components without true knowledge of price agreements and bundle discounts.

If you are intrested. Here is the sturdy / report:

Interestingly, the devil is in the details. The report does state that GM actually MAKES $3k on each Bolt EV sold.

The net loss figure seems to come into play with some math involving the estimated number of sales and the ability for that overall profit to offset R&D costs, tooling, etc.

Page 45 is a breakdown of the Bolt with Options.

Looks like the bias (if some is there is from inside

Left out of this equation: profits (substantial) from replacement parts – think ink cartridges for printers – and sales of carbon credits. Outsider analysts will always be guessing at best.

all the most expensive stuff in EV’s generally have very, very long warranties.

The glaring difference in the Tesla vs Bolt chart is dealer markup. As Tesla has shown, EVs will disrupt the dealer chain too. And good riddance – the dealer experience has long been the worst part of buying a car.

Good catch on the dealers margin John. That’s a big number!!

For Tesla, that dealer’s margin in effectively moved into other OPEX. Building and operating Tesla Stores and Tesla Service Centers in a HUGE operating expense for Tesla that automakers with the traditional independent dealer model don’t incur. The cost/expense of building and operating dealer showrooms and dealer service centers go onto the independent dealer’s Income Statement, not on automaker’s Income statement as it does with Tesla.

The Tesla vehicle selling price will have to provide a return on capital for all the money Tesla spent/spends in building and operating their company stores and service centers. Elon has repeatedly said that Tesla Service Centers will not be profit centers, which means that the profit (return on capital) must come from the selling price of vehicles sold.

Gee, I wonder how much money GM is losing on each Cruze sales. Cruze hatch is roughly the same form as Bolt and only $22K, which means electric bits have to add up to about $20K more.

I think you meant Chevy Volt, not Bolt.

Cruze hatch looks like Bolt, not Volt.

Maybe because they are writing off much larger R&D costs.

Page 45 table shows R&D to be about $7200 for Bolt vs. about $1700 for BMW 330i due to higher volume. That still doesn’t explain $20K.

An interesting thing to note is that if GM sell Bolt in larger numbers, they would profit more since R&D, etc. would be spread out more. By not selling more Bolt in sold out countries like Korea, GM is effectively reducing their profit. It’s very weird why GM would do that. OTOH, GM management is weird, so it’s not a huge surprise they’d rather not make more money.

Good catch on the table on P 45.

It may not be 20K but 7K is significant. It’s exactly how much the loss on the vehicle is.

I know they need to account for it, but I question counting R&D costs….and like I said it depends on how quickly you write it off.

On electrics I’d say 30 years is a better write off time.

I am a bit skeptical of their analysis. Musk says it cost 30,000 to build a Model S and they were giving away 15 kWh batteries with the upgradable S 60 (I assume most of the reason is to make sure the CPO S60s have enough battery capacity to differentiate them from Model 3s).

As mentioned about, if a Cruze can sell for 22,000$ how do you decide it takes an additional 20000$ to turn a profit, especially when you list the entire drivetrain cost at less than 14000$? Yes there are scale issues, but GM’s lack of cost sharing across other platforms was their choice/problem

Interesting. It shows “EV powertrain $9k more expensive today” compared to ICE. Then why does it have to cost over $20K more to profit? It seems Bolt is already making $6.5K more in profit than Cruze hatch $37.5K-($22K+$9K) = $6.5K.

I suspect this is why some dealers can offer almost $5K off Bolt and still turn a profit.

The main issue is Bolt lacks scale, so a higher portion of R&D, SG&A, etc. get allocated to each car sold.

“big brother Elon” ?

So they are guesstamating that a Bolt costs roughly 28k to build and then saying it loses money due to a lack of scale?
So what is the scale to turn a profit in the world according to UBS?
What time frame and production run are they spreading the inderect costs across??
$1,000,000,000 spread over a 5 year 30k a year production run is 6.6k per car…
Increase the production volume to 100k per year and your inderect costs are only 2k per car…
Could GM sell 100k per year between US China and the EU?
Tesla will let us know since they will be the first to try…

A $50 toy costs $2 to make. That’s the *manufacturing* cost.

Then you have to ship it and put it in stores and keep it from being stolen. That’s what eats all the rest of the apparent profit.

The MSRP of the Bolt with shipping is what UBS is using above and kepping it from getting stolen would come from dealer profits just like their salesman and lot space etc..

@ Insideevs

I think it would be great to put a picture of the table and comments of page 45 of

up. Looks really intresting.

“EVs will still carry higher sticker prices, but when the savings on fuel and maintenance are considered, they will be cheaper.”

Nobody cares about that. Consumers simply won’t even be doing the math. Consumers will only care once the *sticker price* is actually on par. Then the savings will be patently obvious.

And even then, the technical drawbacks of the cars (although admittedly, the 2017 batch of cars coming out ostensibly solve them) are also going to be obvious to consumers before they even buy the car.

That said, plenty of people are still buying. It’s not like the market doesn’t exist at all.

No they don’t. Diesel Cars cost around 2000 € more than their gasoline counterparts in Europe. But diesel cars still sell much better since Diesel is cheaper.

You are making a rather large assumption that Americans are actually as smart as Europeans.

In fairness, that European behavior didn’t happen overnight. Diesel cars have been sold there for generations. It appears that a certain point was reached where governments and manufacturers and consumers in Europe reached a consensus that diesel was the future and suddenly half the cars sold were diesels. Unfortunately.

Steering Americans to that same point with EVs will take time. And our economy would probably collapse into depression long before gas ever reached the prices currently paid by Europeans.