GM, Honda plan EV crossovers under $30,000 amid record high transaction prices

As General Motors pushes prices of its gasoline-powered pickups and SUVs ever higher with offerings such as the new GMC Sierra Denali Ultimate trim topping $80,000, it's working with Honda to make electric vehicles as inexpensive as possible.

GM and Honda said this week they're planning a line of electric crossovers that will cost less than $30,000, well below the price of the industry's average gasoline vehicle today.

The automakers intend to sell millions of co-developed "affordable" EVs starting in 2027. The vehicles, mostly compact crossovers, will be based on a new global electric architecture powered by GM's Ultium battery technology and use jointly created advanced battery technology.

By volume, "this is by far the most significant collaboration by any two large OEMs," said Jesse Toprak, chief analyst for Autonomy, which runs an EV subscription service. "This could be the most significant automotive partnership that really turns on that switch of EVs becoming truly mass-produced vehicles."

If successful, the partnership could produce enough vehicles to make GM and Honda leading EV sellers long term, he said.

GM and Honda each have made ambitious commitments toward electrification already, and tackling mass-market EVs together could lead to higher volumes and more advanced battery development, analysts say. Honda aims to be carbon neutral globally by 2050, and GM aspires to have an all-electric lineup by 2035.

"By working together, we'll put people all over the world into EVs faster than either company could achieve on its own," GM CEO Mary Barra said in a statement.

Internal combustion vehicles — selling today at record-high transaction prices — will continue to be the automakers' profit center as they accelerate the transition to EVs.

GM isn't the only automaker working to make combustion vehicles even more profitable amid the EV shift. Volkswagen Group said this week it would discontinue 60 percent of its gasoline-powered vehicles by the end of the decade, and CFO Arno Antlitz told the Financial Times that the automaker will prioritize quality and margins over volume and market share.

GM and Honda's collaboration provides an avenue for the two companies to pool resources and lean on each other's complementary strengths. Even without the partnership, each would have pushed forward on EV development independently, said Stephanie Brinley, principal automotive analyst at IHS Markit.

"I don't see this as a scenario where either company was saying, 'We can't do it. We need to bail each other out,' " she said. "I think they just see opportunity. There is never enough cost savings."

Honda historically has been better at making and selling compact crossovers, while GM is further along in EV battery technology.

Under the companies' North American alliance announced in 2020, GM agreed to help Honda build EVs on its existing Ultium battery platform. The collaboration will lead to the Honda Prologue and an Acura EV, both due to arrive in 2024. The new affordable EV plan calls for the companies to also work on battery development together.

"They have both been looking at solid state, and they can both benefit from each other's existing research to date and get it done a little bit faster," Brinley said.

Joint EV development and cost-sharing will be an advantage for both companies as the industry aims to slash the cost of EVs and batteries, said Paul Waatti, manager of industry analysis for AutoPacific.

"To have both automakers shouldering some of the costs enables quicker development and technology breakthroughs," he said. "For mainstream adoption to take hold, it's got to be affordable, and it has to be in segments that customers are interested in, which is compact crossovers."

Compact crossovers accounted for nearly 1 in 6 light vehicles sold in the first quarter, according to the Automotive News Research & Data Center.

Today, there are few range-competitive mainstream EVs on the market. GM launched the GMC Hummer EV pickup this year starting at nearly $113,000, and next year it will add the Chevrolet Silverado EV, which will debut with a consumer-oriented version priced at more than $106,000.

Starting with high-end EVs helps automakers recoup costs faster, Brinley said. But those kinds of offerings are too expensive to encourage mass adoption.

"If in 2035 or 2040 or 2050, the U.S. market is going to be 100 percent EV, it's going to include the lower entry-size vehicle," Brinley said. "One way or another, they need to fill that part of their lineup."

Five years from now, when the EVs GM and Honda will collaborate on are slated to launch, the automakers are unlikely to be alone in the affordable EV space.

"The holy grail is affordable EVs with decent range," Waatti said. "Right now, the costs are too much for automakers to offer that."