The Path to EVs Is Expensive for Car Companies

Recalls Cost Car Makers Billions

GM (GM), Ford (F), Hyundai (HYMTF), and other automakers are fully supportive of President Biden’s shift to electric vehicles, but the road to an electric future is costing them billions of dollars. From fires to safety recalls, the car makers are incurring extra expenses as they learn how to develop and mass-produce electric vehicles.

Three big recalls this year alone have collectively cost GM, Ford, and Hyundai $2.2 billion, with GM and Hyundai carrying the brunt of the costs.

GM announced it was recalling its Chevrolet Bolt EV in July because of manufacturing defects in the vehicle’s battery which were causing fires. This is costing GM $800 million. Meanwhile in May, Hyundai said it is spending $900 million to recall its Kona EVs.

Batteries, Software to Blame

Transitioning to EVs requires a steep learning curve for automakers. They have to rely on software and batteries to run their vehicles. Those two areas are vital to successfully developing EVs but are not yet part of most companies’ core expertise. To date, much of the vehicle maker’s EV recalls have been due to battery and software problems.

In July Porsche recalled its Taycan electric sedan due to a software glitch which caused the vehicle to lose power while in operation. Ford recalled some of its Mustang Mach-E electric crossovers in April after batteries in the vehicles stopped charging. Ford blamed a software issue.

Hurdles Are Not Insurmountable

Recalls are not uncommon in the auto industry, typically occurring when new vehicles are released. That is partly why vehicles that come equipped with the latest and greatest technology tend to perform poorly among consumers. That could become an issue for the car makers if more high-profile recalls occur.

However, the companies and the analysts who follow them are confident that GM, Ford, Hyundai, and the rest of the auto industry will figure it out and overcome the battery and software challenges.

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