EVOLVING… The story will be updated as new information is verified. Updated 3 times
General Motors expects its electric vehicle portfolio in North America to be profitable through 2025 as it ramps up battery and assembly plant capacity to build over 1 million electric vehicles per year.
CEO Mary Barra used the commitment to open the company’s investor day in New York on Thursday.
The winning number includes vehicle sales revenue, emissions tax credit benefits and revenue from software and parts sales, she said.
Barra said the company’s EV portfolio appeals to a broader range of customers than the competition.
GM’s EV lineup includes plans to sell a small SUV for around $30,000 as well as a luxury SUV, pickup trucks, and Hummer SUVs over the next two years.
The Detroit automaker has set itself the goal of selling only electric cars by 2035.
GM is sticking to a promise from Barra that it will sell more electric vehicles in the US than market leader Tesla by mid-decade.
“Our commitment is to lead the industry,” Chief Financial Officer Paul Jacobson told reporters at Investor Day. “We believe that with the infrastructure that we have built and the vehicles that you will see today, we will be able to get there.”
The EV earnings forecast appeared to be a step backwards from previous predictions that a new generation of GM EVs would make money from the start.
But GM said previous immediate profitability predictions didn’t include the capital cost of moving to the new technology. The 2025 earnings guidance is based on a pre-tax basis that includes the capital costs of building battery factories and converting internal combustion engines to electric vehicles.
Jacobson said it will take some time for individual electric vehicles to reach profit margins in the “low to mid-single digits” in 2025 as costs are spread across more vehicles. “If you look at an individual (vehicle) program, there’s probably better performance than what you see as a whole,” he said.
Profit margins for electric vehicles will be even higher once the clean energy tax credits from the federal law to reduce inflation are applied, Jacobson said.
Despite economic volatility and the possibility of a downturn, GM expressed a little more confidence about this year’s financial results, saying Thursday that it expects full-year pre-tax income of $13.5 billion to $14.5 billion. That’s in the range of the previous guidance of $13 billion to $15 billion. The forecast for free cash flow, the cash remaining after operating and capital expenditures, is $7-9-10-11 billion for the year.
GM also said its Brightdrop commercial vehicle division, which makes electric vans and carts, will contribute over $1 billion in sales next year.
Shares of GM edged higher Thursday as broader markets declined.
As for the new vehicles, GM will launch an all-electric version of the Chevrolet Corvette next year, President Mark Reuss said.
“This will once again set the world standard for performance,” he said.
Reuss provided insights into other new or revised GM vehicles coming over the next two years. New internal combustion engine vehicles will be based on the existing underpinnings, saving costs while still allowing the company to make significant upgrades, he said.
Revised or new entries next year include the three-row Chevrolet Traverse SUV, as well as a new Buick SUV and revamped Chevrolet Trax small SUV starting at about $19,000.
In 2024, GM will revamp the three-row GMC Acadia SUV, making it more truck-like, Reuss said. Then it will revamp the combustion engine version of the Chevy Equinox small SUV in the world’s largest market segment.
For electric vehicles, GM will be resurrecting the Buick Electra name for a new SUV next year, which will be launched first in China and then in the United States. Then comes the Cruise Origin, a multi-person vehicle built for the company’s ride-hailing service. and a Cadillac compact SUV.
2024 EVs include the GMC Sierra full-size pickup, a full-size Cadillac SUV, and full-size Buick and Chevrolet electric cars, primarily for China.
Reuss also said GM is revamping the way customers buy electric vehicles, giving them the option to buy entirely online or at dealerships and saving the company $2,000 per vehicle.
Instead of dealers holding huge inventories, they would keep fewer vehicles on their lots. When a customer orders an electric vehicle, it comes from three distribution centers on US coasts. The centers, two in California and one in Georgia, would stock popular combinations of devices and allow for deliveries in as little as four days, Reuss said.
The system would automate many financing and insurance costs.
“This will result in efficiency gains and cost reductions of $2,000 per unit for GM,” he said, adding that the savings would go to GM.
Reuss also shot at US electric vehicle sales leader Tesla, telling analysts that more than 11,000 Tesla owners had their vehicles serviced at a GM dealership. He said the dealer network is a major competitive advantage for the service.