General Motors raised 2022 cash-flow guidance Thursday after declaring it will make profitable electric cars by mid-decade. GM stock rose in choppy trade, after undercutting a buy point Wednesday.
"We expect our EV portfolio will be profitable in 2025," GM CEO Mary Barra said at an investor event Thursday. By 2025, Barra added, clean-energy incentives provided by the Inflation Reduction Act will help GM's electric vehicles (EVs) bridge the margin gap with internal combustion engine (ICE) cars.
GM also expects to bring battery cell costs below $70 per kilowatt-hour (kWh) by mid-to-late decade, management said Thursday. Battery cells cost $161/kWh on average in 2021. For EVs, a price per kWh below $100 is crucial because it represents price parity with traditional ICE vehicles.
On Thursday, GM narrowed its 2022 EBIT-adjusted range to $13.5 billion-$14.5 billion from $13 billion-$15 billion earlier. But it now expects full-year adjusted automotive free cash flow of $10 billion-$11 billion vs. $7 billion-$9 billion prior.
The automaker also set out various other EV targets. It sees more than $50 billion of EV revenue in 2025. It expects low- to mid-single-digit EV margins in 2025, before tax credits.
Bloomberg first reported on Monday that General Motors will set a target for profitable EVs in 2025.
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Batteries are a big reason why electric vehicles are costly, which has slowed EV adoption. Lithium prices have soared over the past year, along with other key components.
While EVs took the spotlight Thursday, GM management reassured investors that it will be "a busy year" for ICE vehicles, which underpin current profits and are funding the company's transition to EVs.
GM Stock
Shares of General Motors edged up 0.4% to 38.64 on the stock market today, after falling as low as 37.47. GM stock is trying to get back above the 200-day line. Shares are still below a 40.20 buy point from a cup-with-handle base after tumbling 4.4% on Wednesday. GM stock seized the entry last week as after the auto giant's strong third-quarter earnings recovery spurred a strong run.
Ford closed unchanged at 13.90 Thursday, after hitting resistance near its 200-day line earlier this week. Stellantis, formerly Fiat Chrysler, shed 0.5%. Tesla fell 2%. Volkswagen nudged 0.4% higher.
Traditional automakers are making an ambitious shift to electric vehicles, chasing Tesla. The shift comes amid fears of a global recession, which could create car demand headwinds after two years of supply headwinds. Rising yields sparked recession fears again Thursday. The Federal Reserve has been raising interest rates to tame inflation. Higher rates make financing a car more costly for consumers.
General Motors Eyes 2 Million EVs Annually
On Thursday, GM management shared that it expects to produce 400,000 electric vehicles in North America from 2022 through mid 2024, as five assembly plants across the region ramp up.
In 2022, GM will sell approximately 44,000 EVs in the U.S., at a loss.
But by the end of 2025, the automaker is targeting 1 million electric cars annually in each of North America and China, underpinned by $35 billion in investments.
By manufacturing at scale and using lower-cost, next-gen Ultium batteries, GM expects to make profitable EVs. But GM's production of EVs with its Ultium-branded batteries has been very low so far.
Software services attached to those EVs, such as OnStar navigation, will also help GM make a profit.
Meanwhile, Tesla already sells a million or so luxury electric cars annually for a profit.
Next year, GM's ambitious shift to electric vehicles faces a key test.
The automaker will launch an all-electric version of the Chevrolet Silverado pickup, its top-selling model. The mass-market, value-focused Chevy brand will also introduce two new electric SUVs.
By 2030, GM Ford and Stellantis all aim to have as much as half of global sales be electric vehicles.
