GM Claims to Start Making Money on Electric Vehicles in 2025 with Forthcoming Higher Margin Models

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General Motors (GM) is currently facing financial losses on each electric vehicle (EV) it sells, but the company is optimistic about turning a profit by 2025. Chief Financial Officer Paul Jacobson shared this outlook during a Barclays conference in New York. He acknowledged the challenges the company has encountered in scaling up electric vehicle manufacturing but assured analysts that they have addressed these issues.

A specific problem mentioned by Jacobson was the difficulty with machinery responsible for stacking battery cells into modules at the Ultium Cells battery plant in Ohio, a joint venture with LG Energy Solution of Korea. Despite these challenges, GM is confident in achieving mid single-digit pretax profit margins in 2025. This projection surpasses the low-to-mid single digits estimated in previous statements, with the improved figure now factoring in benefits from U.S. government clean energy tax credits.

Currently, GM reports “substantially negative” profit margins on electric vehicles as it invests in building battery plants, retooling factories, and underutilizing them during the ongoing growth of EV production and demand. Despite a recent slowdown in the rate of electric vehicle sales growth in the U.S., Jacobson emphasized that demand for EVs continues to rise. The company remains committed to its goal of establishing factory capacity to manufacture 1 million EVs annually by the end of 2025, contingent on sustained market demand.

Jacobson emphasized GM’s intention to avoid flooding the market with vehicles that lack consumer demand, expressing a reluctance to offer EVs at significant discounts. The growth of U.S. electric vehicle sales has decelerated, raising concerns among automakers about potential further weakening due to factors such as consumer worries about high prices, a lack of charging infrastructure, and range anxiety.

GM’s strategy to make EVs profitable involves spreading costs over more vehicles as sales increase, focusing on selling higher-cost/higher profit EV models, and realizing cost savings in battery production. The company is introducing a range of electric SUVs, including the Chevrolet Equinox and Silverado EV pickup truck, GMC Hummer EVs, and Cadillac SUVs, with plans for a new version of the Chevrolet Bolt in 2025.

In a related development, GM recently announced a $10 billion stock buyback program and a 33% dividend increase, contributing to a 1% rise in its shares to $31.82 following the news. The company’s strategic initiatives and optimism regarding future EV profitability underscore its commitment to navigating the evolving landscape of electric vehicle manufacturing and sales.

Source: Associated Press


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