GM stakes claim to commercial EV market

DETROIT—BrightDrop, General Motors' first new U.S. vehicle brand in more than two decades, aims to reclaim ground in the commercial-van segment long dominated by Ford Motor Co. and accelerate electric vehicle adoption beyond individual consumers.

FedEx will be BrightDrop's first customer for its EV600 van late this year.

"The commercial sector, like the retail segment, is shifting to electric, and it's an opportunity for GM to perhaps be a big player," said David Whiston, senior equity analyst for Morningstar.

GM has committed to spend $27 billion in electric and autonomous vehicle development and launch 30 EVs globally through 2025. Executives have hinted at commercial EVs over the past several months, but the EV600 is the first one the auto maker has confirmed. GM said late Friday that it plans to build the van at its Ingersoll, Ontario, assembly plant starting in November. The auto maker said it would spend $787 million (C$1 billion) to retool the plant as part of a new tentative, three-year labor contract reached with Unifor.

Commercial buyers are more likely to make the EV jump because of their vehicles' fixed routes and costs, Whiston said.

BrightDrop also will sell an electric pallet called the EP1 that allows delivery drivers to more easily transport goods from the vehicle to customers' doors, along with fleet management software and services. Executives say the EV600 and EP1 are just the beginning of BrightDrop's portfolio.

"At GM, we believe in an all-electric future, and we know it's going to take more than electrifying our consumer vehicles to get there. We really need to leverage our electrification expertise to advance other industries as well," Pam Fletcher, GM's vice president of global innovation, told reporters last week.

BrightDrop will be led by Travis Katz, who came to GM from venture capital firm Redpoint Ventures. The brand initially will operate in the U.S. and Canada, with sales and service going through a new BrightDrop dealer network.

GM estimates that the annual market opportunity for parcel, food delivery and reverse logistics in the U.S. will exceed $850 billion by 2025. Demand for urban delivery to fulfill e-commerce orders is expected to grow 78 percent by 2030, GM said, citing the World Economic Forum. The boost in demand is expected to increase the number of delivery vehicles by 36 percent in the 100 largest cities worldwide.

The electric commercial-van segment is expected to become more competitive in the next several years, with new offerings from Ford, Mercedes-Benz and Rivian. Guidehouse Insights forecasts that U.S. sales of battery-powered light commercial vehicles will climb to 623,000 in 2030 from about 56,000 last year.

Ford accounted for 48.6 percent of the U.S. large-van market last year, according to the Automotive News Data Center, vs. a 20.3 percent share for the Chevrolet Express and GMC Savana, which GM has not redesigned since their introduction in 1995.

Production of 500 EV600 vans for FedEx will begin around the same time Ford plans to launch the electric Transit in late 2021. In early 2022, GM will start building BrightDrop vans for other customers.

The EV600, powered by GM's Ultium batteries, will be able to drive up to 250 miles on a full charge, nearly doubling the E-Transit's range.

"It sounds like it will be a fierce battle. What GM announced is not a timid, lukewarm type of approach. It's aggressive," Whiston said.

BrightDrop has done pilot testing of the EP1 with FedEx. The pallets can carry 23 cubic feet of cargo weighing up to 200 pounds, and couriers who used them during the pilot were able to handle 25 percent more packages per day. BrightDrop and FedEx Express will begin another pilot in one of the biggest urban centers in the U.S. this quarter, GM said.

Fletcher said BrightDrop will contribute to GM's bottom line very quickly. "The interest for these products has been tremendous and we have letters of intent signed from a number of other customers," she said.

Ted Cannis, general manager of Ford's North American commercial business, told investors at the Morgan Stanley Auto 2.0 Conference last week that in the next few years Ford will "completely lead the commercial business" with the E-Transit and the electric F-150.

But after GM announced BrightDrop the next day, Brian Johnson, an analyst with Barclays Capital, said he was more confident in GM's strategy than Ford's. "We continue to see Ford lagging GM in electrification—not only in passenger vehicles but now—with GM's announcement at CES of BrightDrop in the (light-commercial-vehicle) market—one of Ford's key product strongholds," Johnson wrote.

The BrightDrop news helped push GM shares above $50 a share for the first time since the company went public in 2010.

GM CEO Mary Barra's CES keynote, which included the BrightDrop news and other EV plans, "showed everybody outside of the industry just how serious GM is about the future," Whiston said. "What I'm hoping is that the market is finally waking up to the fact that GM is serious about EVs. What they've been saying for the past few years is not all talk."