General Motors’ electric vehicles lose money today but will bring in more than they cost to build by the second half of next year on the way to mid-single-digit margins in 2025, its top finance executive said Thursday.
The automaker expects its pretax EV margins to improve at least six-tenths of a point in 2024 from this year, CFO Paul Jacobson said at a Barclays investor conference. That’s mostly expected to stem from greater production volume, in addition to a more favorable vehicle mix and battery cost reductions, Jacobson said. That should get GM to a positive variable profit, which excludes fixed costs, on its EVs in the second half of 2024, he said.
GM expects to have mid-single-digit EV margins in 2025, including the benefit of federal Inflation Reduction Act tax credits, he said. The company previously had projected low- to mid-single-digit EV margins before factoring in the tax credits.
“It’s no secret that at the end of the day, our EBIT [EV] margins are substantially negative,” Jacobson said, adding that GM is investing in battery cell plants and other infrastructure to scale production. “We’re building for the future. So as we continue to ramp up, we’re going to see pretty significant benefits going forward.”
Jacobson did not disclose EV volume targets for 2024, but said production will be “a meaningful step up” from this year. GM has stopped disclosing EV production goals but still expects to have the capacity to build 1 million EVs in North America by the end of 2025.
GM has said it will delay three upcoming models — the Chevrolet Equinox EV, the Chevrolet Silverado EV’s first retail-oriented trim and the GMC Sierra EV Denali — by a few months. That followed a decision to defer at least $1.5 billion in spending by pushing back production of electric Silverados and Sierras at a second plant — Orion Assembly north of Detroit — until late 2025.
An automation equipment supplier issue also has slowed battery module assembly this year, and GM is working to add module capacity at more plants.
“While our execution has been somewhat challenged to date, we believe we’ve identified those challenges and we’ve got a portfolio of really, really strong vehicles coming forward that meet the range and charging characteristics that customers are looking for,” Jacobson said.
The automaker expects to build more Ultium-based EVs with higher variable profits next year, such as the GMC Hummer EV and Chevrolet Blazer EV, while making fewer Chevrolet Bolts, Jacobson said. GM is retiring the current Bolt, which accounts for most of the company’s EV sales and is built on an older battery platform, and launching an Ultium-based version that will cost less to make, though GM has not yet disclosed details or timing.
Lower pricing on battery raw materials and scaling of GM’s joint-venture battery plants — including the opening of a second plant in Tennessee to join one operating in Ohio — will decrease GM’s reliance on costlier imported battery cells, Jacobson said. GM expects to reduce its raw material costs by more than $4,000 per vehicle from this year to next, he said.
GM says its overall EV profitability includes parts and accessories, digital and software-enabled services, its BrightDrop commercial electric vehicle and GM Energy businesses, and benefits from greenhouse gas credits and federal tax credits.
“The path to EV profitability, much like EV demand and EV penetration, is not going to be a straight line,” Jacobson said. “You’ve got to take that vision and combine it with the resiliency that we’ve shown for COVID, for supply chain, for semiconductors and know that bumps in the road aren’t going to deter us from where we’re going to. And that’s about execution.”