General Motors revealed on Thursday its optimistic projections for a substantial reduction in electric vehicle (EV) manufacturing expenses by 2024, coinciding with a strategic focus on the increased production of more lucrative vehicle models. Speaking at a Barclays event, GM’s Chief Financial Officer, Paul Jacobson, expressed confidence in the forthcoming improvements in EV profit margins.
Jacobson outlined projections for an upswing in margins next year, envisioning the attainment of mid-single-digit earnings before interest and taxes margin goals by 2025. Emphasizing a distinct path from becoming the next Tesla, he stated, “We don’t want to be the next Tesla. We want to be the best GM that we can be.”
In a bid to reassure investors, GM took several measures the day before Jacobson’s remarks. These included a declaration of $10 billion in fresh share buybacks, a significant 33% increase in dividends, and a commitment to substantial expenditure reduction within its autonomous vehicle division, Cruise.
Aligned with its commitment to cease the sale of gas-powered vehicles by 2035, GM had previously announced its intention to produce 400,000 EVs from 2022 until mid-2024. However, the company recently revised this goal. Jacobson asserted on Thursday that GM anticipates a “meaningful” increase in EV production next year, with a target of achieving 1 million units of EV capacity by 2025.
Highlighting GM’s strategic plans, Jacobson revealed a targeted reduction of fixed costs in 2024 for EVs, aiming for an approximate $20,000 decrease per vehicle compared to 2023. In evaluating EV profitability, GM considers battery production tax credits and the advantages stemming from reduced greenhouse gas emissions.
Looking ahead to 2024, GM anticipates a shift towards manufacturing more high-profit EVs, such as the Hummer and the Blazer EVs, while simultaneously reducing the production of Bolts. The company plans to temporarily halt the assembly line before introducing the next generation of Bolt models. Notably, a majority of the 56,000 EVs sold by GM in the U.S. this year are Chevrolet Bolts.
GM also foresees significantly lower battery expenses by cutting costs on raw materials and reducing dependence on costly imported battery cells. Collaborating with LG Energy Solution, GM is actively constructing three battery cell plants within the United States, with one already operational in Ohio since last year.
In April, GM announced plans for a joint venture battery plant with Samsung SDI. Jacobson emphasized that the partnership with Samsung is expected to introduce even more economical batteries into the market from 2026 onwards. As of Thursday afternoon, GM’s shares have seen a 0.78% increase in trading.