GM Expects To Make Profits On Electric Vehicles Next Year

I threw a hard elbow into GM earlier this week for its plan to raise its dividends and institute a share buyback, so I’ll give some airtime to the big claim the company made yesterday: EV profitability next year. There are some big asterisks, of course, and also some big opportunities for GM.

Speaking of EV-ish GM vehicles, there’s a government probe into about 73,000 Chevy Volts over a power-loss issue. Remember the Volt? I like Volts.

Vehicle affordability is a big issue these days and Ford thinks, hey, maybe it’ll be able to help there in 2024? That would be nice.

And, finally, NASCAR news. Because I also like NASCAR.

How GM Is Going To Make EVs Profitable

General Motors CFO Paul Jacobson sees a path to profitable EVs (before taxes and interest expenses) around the second half of 2024.

Speaking to the Barclays investor conference he had this to say, via Automotive News:

“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.”

While Tesla is wildly profitable with huge margins, it didn’t happen overnight for that automaker, either. This is what it takes to build a business and, if the company can achieve some form of net EV profitability next year that’s still quite an achievement.

What’s curious to me is how they’re doing it. Thankfully, GM provided some helpful slides (side note: GM has the most annoying media site but extremely legible and clear slideshows).

Slide #1 is above and shows that the company expects variable but positive profits by the second half of the year and mid-single digit pre-tax/pre-interest profits by 2025. It also sees Brightdrop, tax credits, parts and accessories, and software enabled services as profit centers.

But how do you get the expected 60-point margin improvement?

Another slide! These are great slides. The biggest chunk comes from “scale” and that makes sense. In general (he he), the more you can make of something the more efficiently you can make it. The Ultium EV platform meant to underpin the current/next generation of GM’s electric cars has been slow to reach consistent production, but GM is telegraphing lately that most of this has been resolved.

The 20% from battery costs also makes sense, both because lithium costs are dropping and GM sees its own material pipeline improving. Here’s the real bummer, and it’s point #2, the 20% cost improvement it sees from varying its product mix. You can also get a sense of this in the next slide:

It’s not a secret that vehicles like the Blazer, Silverado and Hummer are likely to be more profitable than, say, the Equinox EV or the as-yet-to-be-determined Bolt replacement.

That sucks. It makes sense, I suppose, but it sucks.

America badly needs affordable EVs and the Equinox EV looks great. GM is also slowing down plans for more entry-level trims of its vehicles, including the Silverado.

Again, assuming a limited amount of battery electric vehicles that can be produced next year, higher-margin vehicles are maybe the only way to achieve profitability. Is that kind of profitability actually important or is it a messaging thing?

If it were me, and it’s probably to the benefit of GM shareholders that it’s not me making the call, but if I had a say in it I’d be all-in on a $30k Equniox EV to build up market share and put pressure on Tesla and everyone else. That’s just me, though.

Chevy Volts Under Investigation

You know, on the other hand, maybe it’s extremely admirable that GM is taking such a slow ramp-up to sales of EVs as it makes sure everything works correctly.

I say this because the National Highway Traffic Safety Administration (NHTSA) has opened up an investigation of about 73,000 Volts over issues with the Battery Energy Control Module that might cause some of the hybrids to lose power or fail to restart.

Per Reuters:

General Motors (GM.N) previously issued a technical service bulletin saying if vehicles fail to restart, the BECM may need to be replaced and reprogrammed but has not recalled vehicles, NHTSA said. GM ended production of the Volt in early 2019.

GM did not immediately comment.

NHTSA said the issue may pose a safety risk if vehicles cannot move with the flow of surrounding traffic and is more serious depending on a stalled vehicle’s ability to restart.

We’ll be keeping an eye out for any recall news here at The Autopian for all of our many Volt owners.

Ford Sees Prices Coming Down Next Year

Also at that fancy Barclays Global Automotive and Mobility Tech conference was Ford’s CFO John Lawler. He said vehicles need to be more affordable going forward with more incentives and lower dealer markups.

The way Lawler frames it, via The Detroit Free Press, is pretty interesting:

In remarks made during the Barclays Global Automotive and Mobility Tech Conference, Lawler said the company wants vehicles priced to take a smaller portion of consumers’ monthly disposable income. In 2019, car payments on average accounted for about 13.5% of a buyer’s disposable income and that grew to 15.7% in 2022 and then dipped to about 14.5% in 2023, he said.

Ford closely monitors pricing and spending levels, Lawler said

“We expect that it’s going to revert back to that run rate of about 13.5% as we move through 2024. That’s about another $1,800 per vehicle,” Lawler said. “Dealer margins are still high, so let’s say that $800 of that will have to come out of the dealers. And incentives will probably increase by roughly $1,000. … So that’s how we’re thinking about 2024. That’s all in the plan that we’ve set up, how we’re planning for 2024.”

This works, as Lawler further explains, because he doesn’t see a ton of pent-up demand out there.

I think this is partially correct. Given the current mix of vehicles out there and their pricing, I don’t think there’s more widespread demand above what’s usually expected, which is why downward price pressure is inevitable.

I do think, however, that the success of the Maverick shows that there’s still some demand in lower-cost vehicles that’s simply not being served.

NASCAR’s TV Deals Set For The Next Seven Years

The NASCAR product I most regularly watch is the Xfinity series and it’s already been announced that all of it will be available over-the-air on the CW or on CW’s app in 2025. That’s sweet and, honestly, I plan to try and convince more of you to follow the season with me next year.

But what of the rest of NASCAR? There were concerns that Trucks/Cup would end up on a bunch of different services a la baseball and football. That’s what’s happened, it seems.

You can read the full report on Motorsport.com, but the general idea is below:

Under the new deal which begins in 2025, Fox will get 14 Cup races annually in the first half of the season including the Daytona 500. After Fox, Amazon’s Prime Video will stream five events, marking the first time NASCAR’s premier series will be exclusively live-streamed.

After Amazon, Warner Brothers Discovery will carry the next five Cup races, which will be simulcast on both TNT and the B/R Sports tier on its Max streaming service (formerly HBO Max). NBC Sports will complete the season with the final 14 races, including the championship finale.

That’s going to be so annoying for regular fans. So why does NASCAR want to do this, other than to get money? This is a nice way to get the sport in front of a bunch of different potential viewers who are not currently cable subscribers and therefore don’t get USA and Fox Sports 1/2, where a lot of the races currently end up.

Credit to NASCAR for reportedly getting about $1.1 billion for the seven-year deal, up 40% from the company’s last package.

The Big Question

Do you currently watch NASCAR? How do you feel about this? If you don’t watch NASCAR can I convince you to watch the Xfinity series with me next year? [Ed Note: Or, if you don’t care about NASCAR like I don’t, talk to me about where prices for cars are now, and where you think they should be. -DT].