General Motors (GM) has announced it expects its rapidly growing portfolio of electric vehicles (EVs) will be solidly profitable in 2025 in North America. This is as the company scales electric vehicle capacity in the region to more than one million units annually.
This combined with the ramp-up of software revenue opportunities, significant greenhouse gas benefits and impacts of new clean energy tax credits, will make this profit attainable.
This is great news for GM and shows that the future is electric. Profits for large automakers will come sooner than many expected and will hopefully speed up the transition to zero emissions driving, especially with scaling up helping to reduce the price of electric cars and vehicles.
Mary Barra, GM CEO, said: “GM’s ability to grow EV sales is the payoff for many years of investment in R&D, design, engineering, manufacturing, our supply chain and a new EV customer experience that is designed to be the best in the industry.
“Our multi-brand, multi-segment, multi-price point EV strategy gives us incredible leverage to grow revenue and market share, and we believe our Ultium Platform and vertical integration will allow us to continuously improve battery performance and costs.”
Strong Foundation to Drive EV Growth
In the next three years, GM plans to move aggressively toward EV leadership as EV adoption is expected to approach 20% of US industry sales in 2025. The company will have multiple entries in the pickup, SUV and luxury segments that represent about 70% of EV industry volume. This includes the Chevrolet Silverado EV, Blazer EV and Equinox EV, the Cadillac LYRIQ, the GMC Sierra EV, and the GMC HUMMER EV Pickup and SUV.
GM is also launching a new digital retail platform with its US dealer partners to enhance the shopping and purchase experience for EV customers and reduce costs to GM by an estimated $2,000 per vehicle.
The company will have five GM assembly plants in the US, Canada and Mexico all building electric vehicles. BrightDrop — GM’s tech startup creating EVs, eCarts and software — is on track to reach $1 billion in revenue in 2023. This comes as GM’s CAMI plant in Ontario launches full production of the BrightDrop Zevo 600 delivery van next year and scaling to a projected 50,000 units annually by 2025.
GM’s battery cell joint venture Ultium Cells will be operating plants in Ohio, Tennessee and Michigan by the end of 2024. This will make the company a leader in domestic cell production and a fourth US cell plant is planned.
The US automaker also has secured binding commitments for all the battery raw materials it needs to deliver its 2025 capacity target. The company continues to secure its needs beyond 2025 with strategic supply agreements and direct investments in natural resource recovery, processing and recycling.
GM’s EV growth is supported by a highly profitable portfolio of internal combustion engine vehicles in North America. This includes market-leading pickups and SUVs, great quality, and consistently high scores for customer satisfaction with dealer sales and service.
In 2023, Chevrolet and GMC will press their advantage in the pickup market with the new 2024 Chevrolet Silverado HD and GMC Sierra HD. These will be available in the first half of 2023, as well as the new Chevrolet Colorado and GMC Canyon mid-size pickups.
During the meeting with investors, Paul Jacobson, GM executive vice president and chief financial officer, updated the company’s 2022 guidance and provided several key performance indicators to help investors track the company’s transformation and financial performance through 2025. All of these exclude the positive benefits of the recently passed clean energy tax credits.
Paul Jacobson, GM executive vice president and chief financial officer, said: “We’ve built the foundation to rapidly scale our EV portfolio, make it profitable and maintain strong margins during a period of high investment.
“Our Ultium Platform and battery technology will only get better and less expensive over time, and we have enterprise-wide momentum in EVs, Cruise, software-defined vehicles and new businesses like BrightDrop that will help us achieve our revenue and margin targets by the end of the decade.”
GM now projects that the full-year 2022 adjusted automotive free cash flow will increase to $10-11 billion from its previous guidance of $7-9 billion. GM now projects 2022 EBIT-adjusted for the full year will be in a range of $13.5-14.5 billion, compared to its previous guidance of $13-15 billion.
GM’s 2023-2025 key performance indicators include the total company revenue is expected to grow at a 12% compound annual rate through 2025, reaching more than $225 billion as EV volumes and software revenue grow. Revenue from EVs is expected to be more than $50 billion in 2025.
The company expects to build 400,000 EVs in North America from 2022 through the first half of 2024 and grow capacity to 1 million units annually in North America in 2025. Plus, it expects to reach a US battery cell capacity of more than 160 GWh and 1.2 million cells per day by mid-decade. GM is also focused on reducing the cell costs for the next generation of its Ultium batteries to under $70/kWh by mid- to late-decade.
Total capital spending is expected to be $11-13 billion per year through 2025, funded by ongoing healthy cash flows. GM expects to maintain its historical EBIT-adjusted margins of 8-10% in North America through this growth investment period. GM expects to earn low- to mid-single-digit EBIT-adjusted margins on its EV portfolio in 2025, before the positive impact of clean energy tax credits.