By Peter Ramsay

What links the Chevrolet Equinox to the Ford Escape, and the Jeep Grand Cherokee to the Ford Explorer? The answer is that the first two are the only midsize (European D segment) SUVs and the second two the only compact (European C segment) SUVs made by any of the Detroit Three traditional US automotive heavyweights to make the country’s list of the 25 best-selling passenger vehicles in 2023, according to Car and Driver magazine.

Of these, Stellantis’ Grand Cherokee scrapes into the top ten, while GM’s Chevy is 14th. The larger Ford is 18th, while its smaller offering rounds out the top 25. East Asian competitors — Japan’s Toyota, Honda, Subaru, Nissan and Mazda and South Korea’s Hyundai — dominate the remaining SUV bestsellers, while Toyota and Honda make four of the five saloon cars that still make the list. Tesla is the only other rival to feature with its Model Y midsize e-SUV and Model 3 midsize car.

Truck Addiction

It is an entirely different story for trucks. Ford’s F-150 series, the Chevy Silverado and the Ram Pickup were the three largest sellers in the US last year, while the GMC Sierra came in seventh. The four products between them shifted more than 2mn units.

In short, Detroit loves making trucks, because Americans love buying trucks and because they offer fat margins. But lots of Americans like buying midsize and compact SUVs. Some still even buy saloons, or sedans we should perhaps call them, or sub-compact (European B segment) vehicles.

And, increasingly, the Detroit Three are coming to the realization that it is these buyers, not those that purchase trucks, that they should be targeting with their BEV offerings. There is likely several factors in play here, not least that non-truck buyers might be belong among the earlier adopters of all-electric options.

Going Smaller

But Ford CEO Jim Farley argues that there is also an economic driver in a pivot from going large with his ICE vehicles to going small with his BEVs. “We believe smaller, more affordable vehicles are the way to go for EV in volume,” he says.

“Why? Because math is completely different than ICE. In ICE, the business we have been in for 120 years, the bigger the vehicle, the higher the margin. But it is exactly the opposite for EVs. The larger the vehicle, the bigger the battery, the more pressure on margin because customers will not pay a premium for those larger batteries,” Farley argues.

And he seems genuinely enthused about the new challenge of making smaller BEVs. “We are designing a super-efficient platform, leveraging innovation across our product development, supply chain, and manufacturing teams,” the Ford chief continues. “With no engine or drivetrain, a smaller vehicle can have a much roomier package, the interior package of a class above with a small silhouette. That is a big advantage for customers versus ICE.”

Farley stresses that Ford is not abandoning making larger BEVs entirely. But the initial focus of the firm’s next all-electric products — which he confirms, as we’ve been assuming for a while, will be developed by the so-called ‘skunkworks’ team in California, displacing in the product queue the new offerings Ford had been working on in-house in Detroit — will be “very differentiated vehicles priced under $40,000 or even $30,000”.

The target market will be commuters, as the “use case for smaller, affordable vehicles means shorter trips, more urban locations”. “It fits the duty cycle of an EV,” Farley argues, especially because he clearly has in mind that these will be cars with smaller batteries and more limited range.

“Smaller batteries have an outsized impact on the cost and margin of the vehicle. The consumer tax credit in the US becomes a much larger part of the sticker price of the vehicle, and that is supercharging the lower cost of ownership that EVs have already without it,” Farley explains.

Sustainable Future

“The true fitness test for EV profitability will be on these small vehicles,” he continues. “The only way, we believe, to be enduring is to make money on small EVs and commercial. And that is our bet.”

Interestingly, he also suggests that a renewed Ford enthusiasm for building smaller vehicles will not be limited to BEVs but could extend to other propulsion options too. “We look forward to proving that we can be profitable on smaller vehicles as well, not just on EVs, but across all of our powertrain choices,” Farley adds.

In contrast, what larger BEVs Ford does make will have an “adventure” focus, which EV inFocus is taking as code as expensive and for affluent buyers. “The last success criterion is to be careful about your larger EVs. For us, they will be part of the picture, but success requires even more breakthrough on cost efficiency, much smarter choices on segments,” the Ford chief says.

GM is less explicit about its commitment to success in the increasingly electrified US market through smaller vehicles. But one can read the runes about what new products are exciting it, and which it is deprioritizing.

Hard to Let Go

However, while GM’s existing BEV line-up is much close to not losing it money than Ford’s first generation of all-electric products, it is much less clear that the firm sees long-term margin advantages — other than scale through volume — in smaller BEVs. Nor is it close to abandoning the lure of higher sticker prices that it believes e-pickups will offer it.

“Our best-selling EV so far this year is the Cadillac Lyriq and it is now the market-leading luxury EV in 22 states including Florida, Texas, and Michigan,” says CEO Mary Barra. While the Lyriq is not especially affordable, it is neither a big truck, rather a midsize SUV. GM CFO Paul Jacobson adds the Chevrolet Blazer, a midsize e-SUV, as another factor alongside the Lyriq driving year-on-year increases in GM BEV sales.

But these are not the products Barra is necessarily expecting to move her firm’s BEV scale needle. That honor goes instead to the all-electric version of the Equinox — remember, the 14th best-selling vehicle in the US last year with 210,000+ units sold.

“To unleash the next cycle of EV growth we are scaling production of the Chevrolet Equinox EV with its unique combination of performance, technology, range, and affordability,” Barra says. “We delivered our first 1,000 units late in the second quarter and the reaction from customers, dealers, and the media is very strong.

“One product reviewer said, ‘Chevy seems positioned to grab a piece of the pie that no one else has quite grabbed onto yet,’ and we think that is spot on,” she enthuses. “The response we affordability dealers about the new Equinox EV is just outstanding when they say they look at the design of the vehicle, the performance and the affordability, especially with the consumer tax credit. So, I think we have an opportunity to continue to outperform where the industry is.”

A Big H2

The Equinox has its work cut out. Even though GM sold less than 40,000 BEVs in its core US market in the first half of the year and it produced and wholesaled 75,000, it is still sticking by its guidance of 200,000-250,000 production for the full year, as part of a goal to reach the low 200,000s figure at which the firm expects to achieve “vehicle variable profit on [its] EV portfolio”.

“Key drivers to reach this goal include improved manufacturing scale and efficiencies, including module and pack assembly; reduced cell costs from improved scale and performance at our Ultium cells JV, including working through our inventory of cells produced with higher battery raw materials. This has helped reduce our average cell cost by roughly $30/kWh sequentially from the first quarter, and we expect further improvements in the second half of the year.” says Jacobson.

But hitting the milestone of milestone of profitability at 200,000+ BEVs has been pushed back from second half to fourth quarter, indicating — perhaps unsurprisingly given the H1 progress — that GM anticipates coming in at the lower end of its range. And, while that scale might be enough to make GM’s current BEVs profitable, they will not yet be as profitable as its ICE products.

“Mix will be a bigger headwind in the back half of the year, as EVs have a variable profit lower than the portfolio average,” says Jacobson. And it is also offering no guarantees that its ambitious second half target will be met, which could see production slowed again.

“We acknowledge that Ultium wholesales outpaced customer deliveries by about two-to-one for the first half of the year. This, however, is common when introducing a new vehicle given the need to build availability, options, and customer awareness. As time goes on, if customer deliveries were to continue lagging wholesales, we will take proactive steps to balance production levels,” Jacobson continues.

Bigger, But Not Better

The firm will continue with planned launches of some larger BEVs, such as the Sierra e-pickup and Cadillac Escalade IQ full-size SUV. But again, Barra is more focused on the upcoming Cadillac Optiq, a compact SUV albeit one aimed at the high-end market.

“We are especially excited about the Optiq. Car and Driver said it nails the compact luxury SUV formula,” she enthuses. “We are going to focus on winning new customers with these nameplates, as well as with the next generation Chevrolet Bolt EV, because they represent the largest growth opportunities for us.” Again, the Bolt is a smaller, affordable BEV.

And Barra is excited by an anchor source of demand for the new Bolt, given GM’s decision to use it as the vehicle for its Cruise autonomous driving (AD) robotaxi service, having paused for now development of an AD-specific, steering wheel-free carrier for Cruise passengers.

The switch “allows us to be more capital efficient and get better scale on the Bolt EV as we roll out next year based on the Ultium platform”, Barra says. Based on is an interesting phrase here — reminding us that the resurrected Bolt, which had previously been marked for cancellation, is an outlier in GM’s BEV plans as the only vehicle not fully developed from bottom-up on the in-house battery platform.

In contrast, a new Buick BEV that had been planned for launch this year has been “deferred”. And the reopening of GM’s Orion Assembly facility in Michigan as an e-pickup plant has been pushed back to mid-2026, six months later than GM’s plan at the start of the year.

Barra says that, even with Orion pushed back, GM is “confident that we can meet customer demand for standout EV trucks in the interim by leveraging the production capability and flexibility we have in Factory Zero”. But it could still mean a delay in the launch of the Sierra EV which, alongside the already launched BEV version of the Silverado, is due to be assembled there.

However, despite all this evidence pointing to the fact that GM’s success is likely to be tied to its compact and midsize BEVs, the firm seems to have less clarity than Ford that this is where its success or failure in electrification will likely hinge for the foreseeable future.

Jacobson continues to forecast “improved vehicle mixes as we scale our electric full-size trucks and SUVs”. One can see GM would like that to be true, but there is little short-term evidence that it will be.

Competing Priorities

What of the US arm of Stellantis, the third member of the Detroit Three? It is painfully aware that it needs smaller BEVs to compete more effectively in the US market. But the risk is that it may be too distracted by its other challenges to respond sufficiently quickly or effectively — unless it takes an innovative step.

Stellantis’ problem is that, after CEO Carlos Tavares apologized for “disappointingly and humbling” Q2 results, it has too many other things on its plate to pivot towards the smaller, more affordable BEVs to which Ford is fully committing and GM will also address through the Equinox, Blazer, Bolt and, to some extent, Lyriq and Optiq.

It is currently grappling with the capex costs of launching 20 new products already, as well as what are described as internal operational flaws and US marketing failures that have caused poor performance there.

Among these 20 products, the smallest specifically identified BEV for the US mass market is the Jeep Wagoneer S, a full-size, or European E-segment, SUV. Tavares also talks about a new mid-sized Jeep SUV to launch next year, which, given Stellantis’ overall multi-energy platform product strategy, seems likely to be built on its STLA platform, but offer all-electric, hybrid and possibly even straight ICE version.

But Goldman Sachs analyst George Galliers is concerned that still leaves Stellantis light in the compact and small segments, both of which he notes have enjoyed “strong growth” in the US so far this year.

And while Galliers’ question to Tavares on the Q2 analyst call was not BEV-specific, he wondered whether Stellantis had “something to address the smaller market segment and would there be any opportunity to bring the cheaper venture to the US or is that difficult to get homologated or simply not suitable”. EV inFocus takes that to mean Stellantis’ alliance with China’s Leapmotor, which is BEV-focused.

Acknowledged Gap

Tavares admits that the analyst is “absolutely correct” in pointing out gaps in Stellantis’ US portfolio, particularly given that the subcompact Jeep Avenger “has proven to be less attractive for the US market” and Americas sales efforts for it will now be targeted at Latin America. “One of the things we are missing right now in the US is the brand-new Cherokee, the compact SUV. We will bring it in 2025. The Cherokee that will complement the Grand Cherokee,” the Stellantis chief says.

“It is in the making, it is on the right track, so that what we would call right now the white space is going to be filled in 2025. [It] is appropriate to highlight that miss,” he continues. But Tavares is unapologetic about cancellation in the US of the Jeep Renegade, which could have offered an ICE platform from which to springboard a subcompact e-SUV. “The Renegade was not making money, so no regrets on the Renegade,” he says.

Stellantis also aims to eventually fill that gap, but it will take time, and its pathway currently looks uncertain. “We are going to bring a product that you would call the Renegade successor,” Tavares explains. “So far, we have not yet decided what [it] would be, but that will come in 2026. And it will come with a customer structure and a cost structure that will make the model profitable. This is going to be the model that will be sold at $25,000 as an EV. It is in the making. It is benefiting from everything we have learned on the smart car platform families.”

An Ocean of Difference

The contrast between the glacial pace of the launch of Stellantis’ smaller BEVs in the US to the firm's European product pipeline could hardly be more marked. The Citroen e-CV, Fiat Grande Panda, Lancia Epsilon and Alfa Romeo junior in the B segment and Peugeot E3008 and E5008 and Opel Grandland and Frontera in the C segment are all lauded by Tavares.

And that does suggest one potential solution to Stellantis’ US challenges, along similar lines to Galliers’ thoughts about a possible Leapmotor role except without all the (probably unassailable) hurdles that trying to bring products developed in China to the US would pose.

One thing clearly on Tavares’ mind is his conglomerate’s sprawling brand portfolio, with the CEO now rowing back from wanting to maintain all 14 of them to threatening to shutter those not making money. The obvious question is which brands should go.

Assuming Dodge, Jeep and Ram in the US stable are safe, and similarly Fiat, Citroen, Opel/Vauxhall and Peugeot in Europe, and with a sale of the Maserati marque explicitly ruled out, that leaves Chrysler in the US and the premium Abarth, Alfa Romeo, DS and Lancia brands in Europe.

On this side of the pond, Tavares must also wrestle with the risk/reward equation of not necessarily culling brands but monetizing them through a sale to a competitor, most likely of Chinese origin. Saic has already proven that control even of a niche premium marque in MG can be leveraged into a much more mass-market offering melding a familiar European name with affordable Chinese technology.

So any of the four premium brands could have significant sale value, but also offer the one of the ‘Chinese invaders’ about which Tavares (sometimes, when it suits him and his firm) purports to be concerned a material helping hand in European market penetration.

But, even if Tavares’ enthusiasm for new products from Alfa Romeo and Lancia suggests they could be safe for now, he may well choose to cash in on DS, or perhaps Abarth. The other alternative would be to fold one of these brands into the Leapmotor International joint venture — in other words sell the Chinese-developed vehicles in Europe or wider as DS rather than Leapmotor.

Old Dog, New Tricks

And that brings us rather neatly to Chrysler, the three-product dead duck of the US brand portfolio. Unlike in Europe, Chinese appetite to even attempt to jump through the hoops of acquiring a marque like Chrysler is almost certainly off the table, leaving perhaps only Vinfast, Tata or Mahindra as possible buyers.

So, Tavares’ choice is probably easier here: find a way to make Chrysler work or throw it on the scrapheap. On the former, Stellantis has eight new subcompact and compact BEV products launching in Europe, all under brands that, Fiat excepted, are hardly household names in the US market. On the other side of the Atlantic, it has a brand with instant market recognition but a moribund product line-up, and a slow development pipeline of just a single planned Jeep offering in each segment.

It hardly takes a product strategy genius to suggest that Stellantis would have little to lose, and potentially much to gain, by relaunching Chrysler as a repository of relabeled smaller European BEVs, rather than just calling it quits.

And The Rest…

We’ve been largely thinking about the Detroit 3 and Tesla of late — expect a lot more on the European OEMs in the coming days once all Q2s are wrapped up and we can consider the macro trends fully. One thing we think has been slightly overlooked coming out of Detroit is greater enthusiasm for EREVs.

There have been a couple of much-needed better bits of news for Stellantis in the wake of its results travails: the first Leapmotors are on their way to Europe, while initial demand for the Peugeot E3008 is promising. But I have a little cheer for Tesla. The new affordable model is delayed, probably until June if not later. And perhaps even more worryingly, a high-profile German corporate has reacted to Elon Musk’s ever more unhinged right-wing social media comments by cutting Tesla out of future fleet buying.

If this is the first acorn of a European, or even global, ESG backlash against Tesla products on the back of Musk’s ‘anti-woke’ crusading, his car-selling firm has potentially got a big problem.

As November gets ever closer, the US political impact on the EV sector looms larger. Tellingly, China’s BYD isn’t even trying to include the US in its deal with ridehailing giant Uber.

And Ford and GM have been getting their lobbying boots on, in particular trying to persuade Republicans that, in the event of electoral success in three months’ time, they would not welcome a screeching halt to government support for the BEV industry.