Does the Hummer EV make sense? Culturally, no. Economically, absolutely

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More than a decade ago, as a newly inaugurated President Obama settled into the White House and signs emerged that a global recession had begun to ease, the Hummer brand disappeared. At a time of relative restraint, General Motors’ pseudo-military marque—as discreet as a pair of Carhartt boots at a charity ball—screamed excess. Its unorthodox trucks (if you could call them that) were heavy and wide at a time when the modest Toyota Camry was America’s bestselling vehicle. At just nine miles per gallon in the city, their rate of gasoline consumption was two and a half times that of a conventional car.

Such brawny attributes were so deeply out of step with consumer demand that in 2010, as gas prices in much of the U.S. surpassed $3 a gallon, and President Obama called for new standards requiring new cars to increase fuel economy to 54.5 miles per gallon by 2025, GM abandoned the brand and dismantled its distribution system. Hummer, it seemed, had come to embody everything that was wrong with the world’s largest automaker: too brash, too thirsty, too irrelevant and out-of-touch for a company seeking clarity after its 2009 bankruptcy.

And then there was one. This January, nearly a decade after the last Hummer rolled off the production line in Shreveport, La. and before 100 million Super Bowl viewers, GM’s truck-focused division, GMC, unveiled the Hummer EV in a 30-second ad spot touting 1,000 horsepower, 11,500 pound-feet of torque, and an all-electric powertrain generating zero emissions.

That’s right: Zero.

The Hummer EV won’t receive a proper debut until May 20, but industry observers expect it to be a pickup truck or sport-utility vehicle that can go at least 200 miles between charges. Whatever form it takes, the vehicle nevertheless prompts a host of new questions. Perhaps the greatest: Does the world need another Hummer?

A look at sales trends in the U.S. automotive market, the second largest for GM behind China, suggests the answer is “yes.” For several years running, American drivers have opted to purchase bigger, costlier, and generally thirstier SUVs (and their diminutive counterparts, CUVs) over conventional cars, leading automakers like Ford and Fiat Chrysler to stop selling nonsporty coupes and sedans in the U.S. market. “Luxury vehicles are now SUVs,” says Jake Fisher, director of auto testing at Consumer Reports. “Cars are just around as a curiosity.”

Meanwhile electric vehicle sales are rising, albeit from a tiny base, as the technology’s costs drop and its niche novelty wears off. No longer relegated to environmental nerd-mobiles, electric powertrains are set to appear in pickup trucks from Ford, Tesla, and startup automaker Rivian beginning late next year. With electric motors on tap, “any concerns about environmental conditions are taken off the table,” says Phil Brook, vice president of GMC and Buick Marketing, of the Hummer EV, though it remains unclear whether prospective Hummer buyers were ever sensitive to such concerns.

Whatever the case, sales of GM’s two earlier plug-in electric vehicles, the hybrid Chevrolet Volt (approx. $34,000) and all-electric Bolt EV (approx. $37,000), have fallen in the face of competition from the $40,000 Tesla Model 3. GM discontinued the Volt last year after investing almost a billion dollars in its development. Meanwhile Bolt sales dropped almost 30% between 2017 and 2019. The automaker is planning a new, larger—and yes, more SUV-like—version of the car for 2022, and it expects to expand its EV lineup from there. “Two cars does not make a strategy,” said GM President Mark Reuss at the press conference announcing the new vehicle.

In part, GM’s strategy with the Hummer EV mirrors that of Tesla: Start upmarket. The electric automaker run by entrepreneur Elon Musk entered the industry in 2008 with a $109,000 sports car and has lowered its average sales price (and increased its volumes) with each successive model. GM seeks to enter the fray touting more performance, more luxury, more expense. And a lot more truck.

Counterintuitive? Perhaps. But there’s precedent in the automotive industry. Innovation—as electric cars represent today—has always started at the high end of the market. In earlier days those developments included electric starters, automatic transmissions, air conditioning, turbochargers, and disc brakes, says John Voelcker former editor of Green Car Reports, who has written extensively on both trucks and electric cars. More recent innovations that were first introduced on luxury models include automatic driver safety aids that help bridge the gap between conventional cars and fully autonomous driving machines.

And, of course, electric car batteries. Pricey early Tesla vehicles allowed that company to more easily amortize the high cost of developing new battery technology. “If you’re going to put a costly lithium-ion battery in an electric vehicle, it’s going to be a lot more cost effective to put it in such an expensive vehicle than in an economy car that has to be affordable,” Fisher says.

Reuss has promised that the Hummer EV will, unlike GM’s previous electric efforts, be profitable from its first day on the market. One would hope so: Top-of-the-line models could cost as much as $100,000, comparable to Land Rover’s fashionable Range Rover and far more than Tesla’s planned $40,000 Cybertruck (though history suggests the first models will sell for a much higher price). That should give GM plenty of headroom to pay for big new batteries, analysts say.

For GM, the Hummer EV is only a peek into its broader strategy. The automaker announced plans for its Cadillac brand to lead future electric efforts, and analysts expect a new electric Escalade to be the third product based on the Hummer EV. (The division is also developing new electric architecture that’s expected to appear in an SUV planned for 2023.) But for the broader auto industry, it’s a sign that the era of the “compliance car”—those fuel-efficient models that automakers offered in a bid to reduce their fleet-wide average fuel economy in the wake of tighter national emissions standards finalized during the Obama administration—is over.

“For years, automakers have been trying to figure out the price ceiling for a full-sized truck,” says Sam Fiorani, vice president of global vehicle forecasting at AutoForecast Solutions. “They haven’t found it.”

More must-read stories from Fortune:

How Tesla’s stock price reacted to China coronavirus concerns
—What’s next for a self-driving car startup poised to make history
—Why Nissan is suing Carlos Ghosn for $91 million
—Tesla’s growth problem, by the numbers
How British automakers are bracing for Brexit

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