GM hopes for improved EV profitability in the US
US automotive giant General Motors’ forecasts of further improvements in EV profitability may be thrown into doubt by the Trump administration.
This year, the group estimates EV wholesales will be around 300,000 units from 189,000 units in 2024, with lower EV losses generating a $2-4 billion benefit to group profits. However, analysts at RBC Capital Markets estimate that this benefit will be in the $1-3 billion range as Washington has vowed to scrap some IRA incentives.
GM cautions that its guidance does not account for the impact of future policy changes by the new administration, Kallanish notes. For now, total net income is forecast to more than double year-on-year to $11.2-12.5 billion, with capital expenditures of $10-11 billion, including investments in the company’s battery cell manufacturing joint ventures.
In a letter to shareholders on Tuesday, ceo Mary Barra admits “uncertainty over trade, tax, and environmental regulations” and says the company has been “proactive with Congress and the administration.”
“Whatever happens on these fronts, we have a broad and deep portfolio of ICE vehicles and EVs that are both growing market share, and we’ll be agile and execute as efficiently as possible,” she adds.
Management notes it will leverage its “EV and ICE flexible manufacturing capabilities to follow customer demand.”
In Q4, the company reached a positive variable profit in its EV segment, having doubled its market share in the US to 12.5% since Q1.
EV variable profit, which includes emissions credits and advanced manufacturing tax credits under the Biden administration’s IRA, improved by 35% in Q4 compared to the same period in 2023. For example, the Equinox EV model’s variable profit improved by $1,000 since its launch in Q2, driven by scale and lower battery costs.
In the year to 31 December, group revenue increased by 9% to $187 billion, with net income sliding by 41% to $6 billion due to impairments of $4.4 billion in Chinese joint ventures. The company had previously estimated impairment charges of $5.6 billion.
Hi Patrick, in accounting, impairment refers to a reduction in the estimated or nominal value of an asset. GM had anticipated $5.6 billion in impairment charges in 2024, but the final figure came to $4.4 billion. This is tied to its joint ventures with Chinese automakers, which have been under review. GM and SAIC are restructuring their business and strategies to address market challenges and competitive conditions. The JV’s position in the EV market is weak compared to peers, and for GM to strengthen its presence in the world’s largest EV market, it will have to improve both the technology and profitability of these EVs. GM’s EV profitability targets face more challenges as the Trump administration is scrapping policies that support EV demand and restrict supply chains. Profitability can’t be achieved without economies of scale, R&D investment and supply chain barriers. Hope this helps.
… in relation to its competitors?
What does “ impairments of $4.4 billion in Chinese joint ventures.” mean? And what does all this mean for GM in rela
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Anonymous
Very good overview of the weekly steel market.
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