US Markets
Tuesday, July 23rd, 2024 2:25 pm EDT
Key Points
- Delay in Electric Vehicle Production: General Motors announced a six-month delay in retooling its Michigan electric truck plant, now expected to be completed by mid-2026, which will prevent GM from reaching its goal of producing 1 million EVs in North America by 2025. Additionally, the timeline for Buick’s first EV, originally slated for 2024, remains uncertain.
- Concerns about Future Battery Cell Plants: The delay raises questions about GM’s plans for future battery cell plants. While two facilities are currently operational in Ohio and Tennessee, GM had previously planned to establish four more by 2026. GM CEO Mary Barra mentioned the company would expand cell production in a “meaningful cadence,” but CFO Paul Jacobson did not provide specifics on potential delays or cancellations of future plants.
- Current EV Sales and Production Goals: GM’s U.S. EV deliveries increased by 40% in the second quarter compared to the previous year, totaling 21,930 units, which accounted for 3.2% of GM’s total U.S. sales. GM aims to produce and wholesale between 200,000 and 250,000 EVs in North America this year and expects its EVs to become profitable on a contribution-margin basis by the fourth quarter, once production reaches 200,000 units.
General Motors (GM) announced further delays in its plans for all-electric vehicles (EVs), postponing the retooling of a second U.S. electric truck plant in Michigan by six months to mid-2026. This delay will prevent GM from meeting its earlier goal of having North American production capacity of 1 million EVs by 2025. During the company’s second-quarter earnings call, GM CEO Mary Barra emphasized a commitment to growing responsibly and profitably, highlighting the importance of achieving a balanced and sustainable growth trajectory.
Barra’s remarks came shortly after expressing concerns about GM’s ability to meet its North American EV production capacity target. She did not provide a revised timeline for the release of Buick’s first EV, which was originally expected in 2024. Despite this, the Buick brand remains committed to being fully electric by 2030, aligning with GM’s broader strategy to offer exclusively consumer EVs by 2035.
These developments have raised questions about GM’s future plans for battery cell plants, beyond the two current joint venture facilities with LG Energy Solution in North America. GM had previously announced intentions to establish four multibillion-dollar battery cell plants in the U.S. by 2026. Barra assured that the company would expand cell production at a significant and consistent rate, though GM CFO Paul Jacobson avoided discussing potential delays or cancellations of future EV battery cell plants, only noting the ongoing scaling efforts at the Ohio and Tennessee facilities.
In the second quarter, GM’s U.S. EV deliveries rose by 40% compared to the same period last year, reaching 21,930 units. However, EVs still represented just 3.2% of GM’s total U.S. sales for the quarter. Jacobson stated that GM aims to increase assembly output to achieve production and vehicle wholesales of 200,000 to 250,000 all-electric vehicles in North America by the end of the year. He confirmed that GM wholesaled approximately 75,000 new EVs during the first half of the year and reiterated the company’s expectation that its EVs will become profitable on a contribution-margin basis once production reaches 200,000 units by the fourth quarter.
Despite these plans, Jacobson acknowledged that additional EV sales are likely to reduce the company’s overall earnings, as the profits from EVs are currently lower than those from GM’s traditional gasoline models. This underscores the ongoing financial challenges GM faces as it transitions from internal combustion engines to electric powertrains. Nevertheless, GM remains committed to its long-term vision of an all-electric future, albeit with a cautious and measured approach to scaling production and expanding infrastructure.
For the full original article on CNBC, please click here: https://www.cnbc.com/2024/07/23/gm-slows-its-ev-plans-again-even-as-sales-grow.html
