© Reuters. GM looks to cut EV costs while searching for profit from green vehicles
General Motors (NYSE:) announced Thursday that the Detroit automaker expects substantial decreases in electric vehicle manufacturing expenses by 2024 while simultaneously ramping up the production of more lucrative vehicle models.
During a Barclays event, GM’s Chief Financial Officer, Paul Jacobson, expressed confidence in the company’s upcoming enhancements in EV profit margins.
He outlined projections for an upturn in margins next year, foreseeing the achievement of mid-single-digit earnings before interest and taxes margin goals by 2025.
“We don’t want to be the next Tesla. We want to be the best GM that we can be,” said Jacobson.
Just a day prior to his remarks, GM implemented several measures aimed at reassuring investors. The automaker’s actions included the announcement of $10 billion in fresh share buybacks, a notable 33% increase in dividends, and a commitment to significantly reducing expenditures within its autonomous vehicle division, Cruise.
In line with its commitment to cease the sale of gas-powered vehicles by 2035, GM had previously stated its intention to produce 400,000 EVs from 2022 until mid-2024. However, the company recently retracted this goal.
Jacobson said Thursday that GM would see a “meaningful” EV production hike next year. “We do still expect to have 1 million units of (EV) capacity by 2025,” he said.
Jacobson highlighted GM’s strategic plans to achieve a reduction of fixed costs in 2024 for EVs, targeting an approximate $20,000 decrease per vehicle compared to 2023.
In determining the profitability of its EVs, GM factors in battery production tax credits and the advantages stemming from reduced greenhouse gas emissions.
Furthermore, GM anticipates a shift towards manufacturing more high-profit EVs in 2024, such as the Hummer and the Blazer EVs, while simultaneously decreasing the production of Bolts, with plans to halt the assembly line temporarily before introducing the next generation of Bolt models.
A majority of the 56,000 EVs sold by GM in the U.S. this year are Chevrolet Bolts.
GM anticipates notably lower battery expenses by cutting costs on raw materials and reducing dependence on costly imported battery cells.
Teaming up with LG Energy Solution, GM is actively constructing three battery cell plants within the United States, one of which began operations in Ohio last year.
GM announced plans in April to establish a joint venture battery plant with Samsung SDI. Jacobson emphasized that the partnership with Samsung will introduce even more economical batteries into the market from 2026 onwards.
Shares of GM are up 0.78% in afternoon trading on Thursday.