General Motors affirmed at an investor event on Tuesday that its EV losses are diminishing and that its electric vehicles will soon cross the bridge to profitability. GM stock bounced off a key level on Wednesday.
"GM is benefiting the most among legacy (automakers) from the Inflation Reduction Act both for battery production and to consumers in the form of a $7,500 per vehicle credit," RBC Capital Markets analyst Tom Narayan said in a late Tuesday note. He has an outperform rating on shares and a $54 price target.
But GM narrowed a key production target for electric cars, signaling it may lean more heavily on fleet and rental sales in the EV battle against Tesla and Ford.
"We remain on track to produce and wholesale about 200,000 GM-branded EVs this year" in North America, GM CEO Mary Barra said during Tuesday's investor event. Due to tepid consumer demand, the auto giant had lowered its output goal in June to 200,000-250,000 EVs, down from 200,000-300,000 earlier, before pulling it back further on Tuesday to "about 200,000" EVs. It had originally looked to build 400,000 electric cars by mid 2024. Some analysts had feared GM could withdraw its production target entirely given that it sold about 70,000 EVs over the first nine months of the year.
EV Spotlight At GM Investor Event
The investor event comes after GM's U.S. EV sales vaulted 60% in the third quarter, compared with a 2% decline for its total new vehicle sales. The auto giant overtook Ford to become the No. 2 EV seller behind Tesla in the U.S. market, at least for now, thanks to a growing lineup of new and cheaper electric models. It has overcome production challenges as well.
But investors remain worried about EV losses for automakers given the high costs of developing this technology. Moreover, American consumers remain lukewarm about electric cars thus far.
Management said Tuesday that EV losses may have peaked this year and that GM is "making rapid progress" toward profitability as EV volumes increase and battery cell costs decrease. They affirmed the company's commitment to traditional vehicles with internal combustion engines (ICE) even as it invests in electric cars, an emerging growth market.
In 2025, GM said it expects to narrow losses on electric vehicles by $2 billion to $4 billion. "What has been a headwind to earnings will soon become a tailwind," the company said in a news release.
With ICE sales still robust, GM's profits in 2025 will be in the same range as 2024, CEO Barra said. Worries about peak profitability have dogged the auto industry of late.
Later this week, Tesla will hold its own event for investors, focusing on robotaxis and possibly revealing the cheapest Tesla model yet.
Besides EVs, GM on Tuesday addressed plans to introduce eight new or redesigned SUVs, to improve China results, and to keep capital spending in 2025 "consistent with this year's levels."
GM Stock's Muted Reaction To Investor Day
Shares of General Motors rallied 4.2% to 47.94 on the stock market today. GM stock topped a 49.86 buy point on Sept. 2, then pulled back to the 50-day moving average. It bounced off that support level in slightly above-average volume on Wednesday.
Ford shares rose 1.1% on Wednesday, while Tesla stock fell. Ford stock remains below a falling 50-day line and even further under the 200-day line. Tesla shows a 264.84 cup-with-handle entry.
Recently, automakers faced a surprise EV slowdown in the middle of their shift away from ICE cars. That forced GM to yank several prior targets for electric cars, though EV momentum is now on the upswing.
Year to date, GM stock is up 33.5% vs. declines for shares of both Tesla and Ford. That reflects booming ICE profits thanks to strong pricing and lower incentives vs. other automakers.
Please follow Aparna Narayanan on X @IBD_Aparna for more coverage.
