GM’s Chevy Bolt recall comes with a huge price tag

By Chris Isidore, CNN Business

General Motors’ very expensive Chevy Bolt recall highlights one big risk of building electric vehicles.

GM is preparing to spend $800 million to fix — or possibly replace — the batteries in nearly 70,000 Bolts due to a fire risk. That comes out to about $11,650 per vehicle, making it one of the most expensive recalls ever on a per-car basis.

Meanwhile, Hyundai is spending $874 million to replace the batteries in 82,000 of its own EVs (also for a fire risk, though these are different battery models. That comes to just under $11,000 per vehicle.)

These costs are staggering — and exponentially higher than the average price tag of an auto recall over the last 10 years, which was only about $500 per vehicle, according to Mike Held, director of the automotive and industrial practice at consulting firm AlixPartners.

And they should serve as serious warnings to the industry.

“Battery safety and durability will be increasingly important if auto companies want to avoid some of the large battery-recall costs that have befallen the consumer electronics industry,” Held said.

The GM recall was prompted by at least nine fires tied to a malfunction in the battery, all of which occurred when the cars were shut off. GM is still figuring out how to address the problem, but replacing either the battery cells or the entire battery is likely one option. The automaker has urged drivers to not park their cars in garages, or next to homes or other structures.

GM disclosed the $800 million recall price tag on Wednesday as part of its quarterly financial report. That cost was significant enough to be largely responsible for the company posting earnings that fell short of Wall Street forecasts, which sent the stock sharply lower.

Previous GM recalls

Though the Bolt’s per-car recall price tag is hefty, this is by no means the most expensive total cost of a recall. Because there are so many more gasoline-powered cars on the road, recalling those vehicles can be hugely expensive.

For example, in November, GM took a $1.2 billion charge for replacing Takata airbags. That recall covered 7 million vehicles, so the per-car cost was less than $200. In total, the $9 billion-plus cost of replacing more than 67 million airbags across all the major automakers drove Takata into bankruptcy in 2017.

The challenge for the Bolt and other electronic vehicles is that the large batteries are by far the most expensive component — so replacing the battery is comparable to replacing the entire engine in a traditional car.

GM says the problem with the Bolt batteries was caused by two rare manufacturing errors in model years 2017 to 2019, and the more recent models did not undergo the same battery manufacturing process and are not included in the recall. Its new generation of EVs will use its Ultium battery and will not be subject to the same fire risk.

The fires and the recall are a problem for GM beyond just the cost as the automaker tries to convert from building gas-powered cars to exclusively electric vehicles in the next 15 years. GM has committed to investing $35 billion in the transition to emission-free vehicles.

Fire risk is not exclusive to EVs

Though the EVs are grabbing headlines lately, there have been plenty of fires involving gasoline-powered cars. The National Fire Protection Association estimates there were 212,500 vehicle fires that caused 560 deaths, 1,500 injuries and $1.9 billion in direct property damage in the US in 2018, the most recent year for which data is available.

Some of those fire hazards have resulted in expensive recalls, including involving 2.7 million Jeep Grand Cherokees in 2013. Fixing that problem, which caused accidents that resulted in more than 50 deaths, cost about $100 per vehicle, according to an estimate from the Center for Automotive Research.

The most expensive recall on a per-car basis likely came in 2014 and involved 785 Porsche 911 GT3 sports cars following two fires. Porsche did not release the cost of that recall, but it was certainly more expensive on a per-car basis than the recent GM or Hyundai recalls.

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