General Motors’ sweeping Chevy Bolt recall is going to cost the company a lot of money. Electric vehicles are more expensive to produce than conventional vehicles, and, consequently, they’re more expensive for buyers. Of course, this also means that issuing a recall on the components of EVs also costs the company a pretty penny.
It’s hard to imagine GM issuing this recall unless they were legally required to. That’s not a dig at GM: this recall is going to cost them somewhere in the range of $800 million, making it one of the most expensive recalls in history. Why is it going to cost so much? Read on to find out.
The issue in the recalled Chevy Bolt vehicles is that their batteries have a heightened fire risk. Nine fires have been reported from Bolt vehicles due to faulty performance in the batteries. This is especially concerning because all nine fires have been reported as taking place while the vehicles were powered off. This indicates that the battery is still sending a current throughout the vehicle even when powered down, causing overheating that can result in the vehicle catching fire.
This means that GM will have to repair or replace the batteries in all of the affected vehicles. Estimates place the cost for this endeavor around $12,000 per vehicle. That’s almost enough money to just buy a budget conventional vehicle outright.
The staggering price tag of the recall contributed to GM’s stock price taking a nosedive this week. The cost of the recall will significantly cut into GM’s earnings this quarter, causing them to fall well short of predictions about their financial performance. Such losses are hard for any company to absorb, but it’s especially tough for GM.
New car sales have been slumping in the US recently, and the average age of a car on the road gets older every year. Right now, that average sits around ten years. Suffice it to say, this is a bad time for GM to need to pay $800 million out of its own pocket to repair a model of car that barely contributes to its bottom line.
Going forward, automakers will need to take pains to ensure their EVs have functional batteries that have no risk of overheating or catching fire. These components are so expensive that they can essentially bankrupt a smaller company if they need to be recalled. This is a lesson in quality assurance that GM will not soon forget.