General Motors (GM.US), the top revenue-generating automotive company in the United States, has recently made a significant decision: it announced the abandonment of the heavily invested Ultium battery in recent years, instead adopting lithium iron phosphate (LFP) battery technology to achieve a more flexible and personalized battery solution.

This move represents a major shift in General Motors' battery strategy. Some market observers suggest that the company's action is aimed at enhancing the profitability and market competitiveness of electric vehicles to cope with fierce industry competition.

After layoffs, batteries also become a direction for cost reduction.

General Motors is one of the three major traditional American automotive companies, the highest-selling car manufacturer in the United States, and holds a share in the Chinese market.

Currently, many multinational car companies in the United States are facing tremendous pressure from slowing market demand, declining sales, and profits, and layoffs have become an important measure for these companies to reduce costs. This year, General Motors has repeatedly announced layoffs, including in the Chinese market. In September of this year, General Motors stated plans to lay off more than 1,000 salaried employees worldwide, mainly in the American market.

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Although layoffs are for streamlining processes, General Motors also has the need to reduce costs. For the electric vehicle business, which has been in a loss-making phase, General Motors decided to take action in the battery area in order to quickly turn losses into profits in the fierce market competition.

General Motors launched the Ultium battery technology in 2020, which it claimed offers ultimate endurance and power. This battery technology has been applied to models of its Cadillac, Chevrolet, and Hummer brands.

However, in terms of cost, General Motors is currently using more common nickel-cobalt-manganese batteries on the Ultium platform. From a material cost perspective, nickel-cobalt-manganese batteries do not have a cost advantage over lithium iron phosphate batteries, and many car companies, including Tesla (TSLA.US) and Ford (F.US), commonly use lithium iron phosphate batteries.

Despite the impressive growth in General Motors' electric vehicle sales, the division is still mired in losses. Reports indicate that in 2023, General Motors' electric vehicle business incurred substantial losses, with a deficit of up to $2.5 billion.

Morgan Stanley, in its research report last month, believed that the U.S. automotive industry will face a more severe situation, with U.S. dealers' inventory on the rise and vehicle affordability still poor. The bank directly reduced its target price for General Motors from $47 to $42 and downgraded its rating from "hold" to "sell."Therefore, against the backdrop of continuous losses in the electric vehicle business, a severe situation in the domestic US market, and intensified competition in the Chinese market, switching to cheaper lithium iron phosphate batteries is an important way for General Motors to control costs.

General Motors introduced that it plans to reduce the average battery cost to $60 per kilowatt-hour from 2023 to 2024, and expects to further reduce it by $30 in 2025 by adopting lithium iron phosphate batteries.

At the beginning of this year, General Motors CEO Mary Barra stated that the company's goal for this year is to cut about $2 billion in costs and reintroduce hybrid vehicles in the product lineup.

The Washington Daily recently commented in an article that almost all of General Motors' profits are contributed by the North American region, and the message it conveys to people is "glory has passed".