DETROIT (AP) — Even though General Motors is losing money on each electric car it sells, the firm believes that by producing higher-margin EVs, streamlining the production process for its batteries, and seeing a decrease in battery costs, it will be able to turn a profit in the mid-single digits before taxes in 2025.
At a Barclays conference in New York on Thursday, Chief Financial Officer Paul Jacobson made this admission to analysts while acknowledging that the company has had difficulty increasing the production of electric vehicles. He claimed that although there had been some bumps in the ramp, they had been fixed.
In particular, the business has experienced issues with equipment at its Ultium Cells battery plant, a joint venture with Korea’s LG Energy Solution, that stacks battery cells into modules.
A little better than the low-to-mid single digits the company had previously predicted, according to Jacobson, was the forecast provided on Thursday on mid-single-digit profit margins in two years. However, the revised amount accounts for the advantages of US government renewable energy tax credits.
According to Jacobson, as EV production and demand increase, the business is building battery plants, retooling factories, and then underutilizing them, resulting in “substantially negative” margins on electric vehicles currently.
According to Jacobson, demand for electric vehicles is still growing even though the pace of growth in sales has slowed in the United States this year. By the end of 2025, the business still intends to expand its factory capacity to produce one million electric vehicles annually, but it won’t be able to meet demand if there isn’t a market for them. “I don’t want to force cars into a market that isn’t ready for them,” he declared, adding that GM isn’t interested in offering steep discounts on EVs.
Since last year, the increase in sales of electric vehicles in the US has drastically decreased. EV sales were increasing by over 90% annually as of June 2022. The 12-month growth rate decreased to almost 50% by June of this year, and it stayed there through the end of October. Because consumers are worried about expensive costs, a scarcity of charging stations, and running out of battery life, automakers are growing more and more afraid that the pace may slow down even further.
A number of electric SUVs are being released by General Motors (GM), such as the nearly $30,000 starting Chevrolet Equinox, the EV Silverado pickup truck, the EV GMC Hummer, and a few Cadillac SUVs. In 2025, a new iteration of the Chevrolet Bolt is also planned.
By selling more higher-cost/higher-profit EVs, spreading costs over more vehicles as sales rise, and reducing battery costs, the business hopes to make the EVs profitable. stated Jacobson.
GM’s stock increased by almost 1% to $31.82 on Thursday after the company announced a $10 billion stock repurchase program and a 33% dividend increase on Wednesday.