General Motors Races Ahead In Its Effort To Catch Up To Tesla

On April 25th, General Motors GM reported its first quarter revenue rose but profits dipped, while improving its full-year forecast. Both top and bottom lines exceeded Wall Street’s expectations with cost-cutting efforts GM made showing results sooner than expected. 

Key First Quarter Figures

Revenue for the quarter rose 11.1% YoY as it amounted to $39.9 billion while net income dropped 18.5% to a bit less than $2.4 billion while adjusted EBIT dropped 6% to $3.8 million. 

Excluding some dividend payouts, net income attributable to stockholders fell 18.5% from 2022’s comparable quarter to about $2.4 billion. Along with the employee buyout program, GM also spent $99 million on buying out Buick dealers that did not want to invest in EVs as part of its strategy to accelerate its EV progress. A similar deal was offered to Cadillac dealers back in 2020.

Full Year Outlook

The largest U.S. automaker by sales raised its expectations for 2023. Adjusted earnings are expected in the range between $11 billion to $13 billion, or $6.35 to $7.35 a share. The prior range was between $10.5 billion to $12.5 billion, or between $6 and $7 a share. Adjusted automotive free cash flow is now expected to be in a range between $5.5 billion and $7.5 billion, while the previously forecasted range was between $5 billion and $7 billion. However, net income attributable to shareholders was lowered due to an announced employee buyout program in the amount of $875 million. It is now expected in the range between $8.4 billion and $9.9 billion, while it was previously expected to be in the range between $8.7 billion to $10.1 billion. GM expects to achieve its $2 billion cost reduction goal this year. 

What is a potential risk is the expiration of the contract with the United Auto Workers Union that is due in the fall. Before the current deal was reached back in 2019, it was preceded by a six-week strike. Barra did not comment on the upcoming talks.

Supercharging In An Effort To Catch Up To Tesla

CFO Paul Jacobson told Yahoo Finance that GM targets to produce 50,000 vehicles by the end of the first half of the year, aiming to double its EV production in the second half of the year.

Not Joining Tesla In Discounting Prices

GM is still not interested to enter in the price war that Tesla Inc TSLA started earlier this year, with Jacobson saying that management feels good with the current pricing positioning. 

GM ‘owns’ the list of most electric vehicles eligible for both tax incentives

General Motors is leading the list with most vehicles that qualify for the full $7,500 tax reduction under the Inflation Reduction Act. GM is joined Ford Motor F who entered the list with its electric version of the F-150 pickup, the Lightning in both standard and extended range, Stellantis N.V.STLA Chrysler Pacifica PHEV and of course, Tesla with its Model 3 performance and Model Y performance, all-wheel drive and long-range all-wheel drive. Volkswagen AG VWAGY also made the cut with its ID.4 that retained eligibility for the full $7,500 credit after switching the battery supplier. The cheapest Tesla Model 3, Ford’s Mustang Mach E in both ranges and both of Rivian Automotive Inc RIVN’s R1T pickup and R1S SUV only qualified for the $3,750 half credit. A few manufacturers vanished from the list with the newest requirements, such as Nissan Motor Co., Ltd. NSANY with its fully electric Nissan Leaf and Genesis G70 as well as Bayerische Motoren Werke Aktiengesellschaft BMWYY with its BMW 330e and BMW X5 xDrive45e.

Pulling The Plug On Its First Mass Market EV

Despite posting record sales in the first quarter of 2023, General Motors revealed that it will no longer be producing its Chevy Bolt after this year. Both the model released in late 2016 and the larger Electric Utility Vehicle introduced in 2021 are both being axed and it is not because of lack of demand as sales have been record high. It is because the older design and chemistry used in batteries is outdated with newer battery packs being 40% cheaper. 

Joining Forces With Samsung SDI

Also on Tuesday, but in a separate announcement, General Motors revealed that together with Samsung, it will build a new battery cell manufacturing plant in the United States that should be operational next year. Together, GM and Samsung, will invest more than $3 billion as the produced battery cells will help GM scale its North America EV capacity to more than 1 million units per year, which is the current target it aims to reach by 2025. 

All in all, General Motors is feeling confident about 2023 as continues its path of playing catch-up with Tesla with CEO Mary Barra claiming 2023 will be the breakout year for the company’s electric lineup. Despite strong results and a hiked guidance, GM’s shares dropped 3% upon results.