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GM Expects Electric Vehicle Profitability by 2025 Despite Current Losses

by Anna

General Motors (GM) anticipates achieving mid single-digit pretax profit margins in 2025, despite currently incurring losses on each electric vehicle (EV) sold. During a Barclays conference in New York, GM’s Chief Financial Officer, Paul Jacobson, acknowledged the challenges faced in electric vehicle manufacturing but expressed confidence in the company’s trajectory toward profitability.

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Current Challenges: GM is grappling with losses on each EV sale, citing negative margins due to ongoing investments in battery plants, factory retooling, and underutilization of production facilities. Jacobson noted the company’s struggle with battery cell stacking machinery at its Ultium Cells battery plant in Ohio, affecting production.

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Path to Profitability: GM aims to achieve mid single-digit pretax profit margins by 2025, factoring in higher-margin EVs, improved battery manufacturing efficiency, and reduced battery costs. The guidance, slightly better than previous estimates of low-to-mid single digits, includes benefits from U.S. government clean energy tax credits.

EV Sales Growth: Despite a slowdown in the growth rate of U.S. EV sales, GM sees rising demand for electric vehicles. The company plans to build manufacturing capacity for 1 million EVs annually by 2025 but emphasizes the importance of aligning production with market demand to avoid oversupply.

Product Expansion: GM is introducing a range of electric SUVs, including a Chevrolet Equinox with a starting price around $30,000, a Chevy Silverado EV pickup truck, GMC Hummer EVs, and updated Cadillac SUVs. The company’s strategy includes introducing a new version of the Chevrolet Bolt in 2025.

Profitability Factors: GM aims to achieve EV profitability by leveraging economies of scale as sales increase, focusing on higher-cost/higher-profit EV models, and realizing cost savings in battery production. Jacobson emphasized the importance of not discounting EVs significantly.

Stock Performance: GM’s shares rose approximately 1% to $31.82 following the announcement. The company recently revealed a $10 billion stock buyback program and a 33% dividend increase.

Despite the challenges faced in the current phase of EV production, GM remains optimistic about the future profitability of its electric vehicle lineup. The company’s strategy includes addressing manufacturing issues, expanding its EV product portfolio, and aligning production with market demand.

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