GM CEO Barra says electric vehicles will be profitable by 2025

GM CEO Barra says electric vehicles will be profitable by 2025
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GM CEO Barra says electric vehicles will be profitable by 2025

General Motors said it expects its electric vehicle portfolio to generate profits in North America by 2025 as it increases its battery and assembly plant capacity to produce more than 1 million electric vehicles per year.

CEO Mary Barra used this word to kick off the company’s investor day event in New York on Thursday.

The profit figure includes revenue from vehicle sales, benefits from emissions tax credits, and revenue from sales of software and parts, he said.

Barra said the company’s EV portfolio appeals to a wider range of customers than its competitors.

GM’s EV lineup includes plans to sell a small SUV for around $30,000 over the next two years, plus a luxury SUV, pickup truck and Hummer SUV.

The Detroit automaker has a goal of selling only electric passenger cars by 2035.

GM remains true to Barra’s commitment to sell more EVs in the US than market leader Tesla by the middle of the decade.

“Our commitment is to lead the industry,” Chief Financial Officer Paul Jacobson told reporters at the investor day event. We believe that we will reach this point with the infrastructure we have established and the vehicles you will see today.”

The profit forecast for electric vehicles seemed to be a step back from previous predictions that next-gen GM EVs would make money up front.

However, GM said its previous estimates of immediate profitability did not include the capital costs of migrating to the new technology. The profit forecast for 2025 is based on a pre-tax basis, which includes the capital costs of building battery factories and converting combustion plants to electric vehicles.

Jacobson said it will take time for individual electric vehicles to reach “low to mid-single-digit” profit margins in 2025, as costs are spread across more vehicles. “If you look at any individual (vehicle) program, there is probably better performance than what you see as a whole,” he said.

EV profit margins will rise even higher when clean energy tax credits from the federal Inflation Reduction Act are implemented, Jacobson said.

Despite economic volatility and the possibility of a downturn, GM appeared a little more confident about this year’s financial results, saying on Thursday it expects full-year pre-tax revenue to be between $13.5 billion and $14.5 billion. This is within the previous $13 billion to $15 billion guidance range. Estimated free cash flow, remaining cash after operating and capital expenses is $7 billion to $9 billion to $10 billion to $11 billion for the year.

GM also said its Brightdrop commercial vehicle unit, which makes electric vans and wheelbarrows, will contribute over $1 billion in revenue next year.

GM’s shares rose slightly on Thursday as broader markets tumbled.

As for new vehicles, President Mark Reuss said GM will launch an all-electric version of the Chevrolet Corvette next year.

“This will set the world standard for performance again,” he said.

Reuss has hinted at other new or revised GM vehicles that will hit the market in the next two years. He said the new internal combustion vehicles will build on existing foundations, offering cost savings but allowing the company to make significant improvements.

Refreshed or new entries next year include the Chevrolet Traverse three-row SUV, a new Buick SUV and a refreshed Chevrolet Trax small SUV with prices starting at around $19,000.

Reuss says that in 2024, GM will remake the three-row GMC Acadia SUV, making it more truck-like. Next, it will renew the internal combustion version of the Chevy Equinox small SUV in the world’s largest market segment.

For electric vehicles next year, GM will revive the Buick Electra name for a new SUV that will go on sale first in China and then in the US. and a Cadillac compact SUV.

The 2024 EVs include the GMC Sierra full-size pickup, a full-size Cadillac SUV, and full-size Buick and Chevrolet electric cars mainly for China.

Reuss also said that GM is renewing the way customers buy electric vehicles, giving them the option to buy completely online or at the dealership, saving the company $2,000 per vehicle.

Instead of dealers with large stocks, they would have fewer vehicles on their plots. When a customer ordered an EV, it would come from three distribution centers on the US coast. Reuss said centers, two in California and one in Georgia, will stock popular equipment combinations and allow for deliveries in as little as four days.

The system will automate many financing and insurance costs.

“This will translate into $2,000 per unit in efficiency and cost reductions for GM,” he said, adding that the savings would go to GM.

Reuss also fired at US electric vehicle sales leader Tesla, telling analysts that more than 11,000 Tesla owners have their cars serviced at a GM dealership. He said the dealer network is a huge competitive advantage for the service.

Associated Press, Tom Krisher

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