General Motors announced on Tuesday that it will spend a whopping US$35 billion which was previously planned through the year 2025 in an attempt to speed up its EV line-ups.
The American automaker is in fact more focused on releasing more EVs over the next coming years rather than prioritizing profits.
The company expects a 2022 operating profit of US$13 billion to US$15 billion, in line with a record 2021 operating profit of US$14.3 billion despite the fact that vehicle production is expected to increase in the supply of semiconductors.
“What we’re doing here is essentially redeploying some of the upside earnings from the additional volume into acceleration and taking a longer-term view than just trying to maximize short-term profit,” GM Chief Financial Officer Paul Jacobson said during a conference call.
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The company also plans an annual capital spending of US$9 billion to US$10 billion in 2022 and for the next several years even though the company isn’t paying a dividend.
According to Mary Barra, the company’s CEO, she said the company is accelerating within the ’20 to ’25 timeframe from the US$35 billion but there are also some investments that the company is pulling in which are planned later in the decade.
Barra also added that GM will announce the site for its fourth EV battery plant by the end of June while also planning to invest in a third electric truck assembly plant. Currently, the company has about 110,000 reservations for the electric version of its Silverado pickup truck.
She didn’t give a new figure for total EV investments through the year 2025. GM also announced in its quarterly report that it will spend some US$1.5 billion more this year in an attempt to speed up the development of its software and EV portfolio.
The company however added that its share price has fallen from its recent highs due to Ford’s increased investment in its own EV programs – particularly the electric Ford F-150 Lightning pickup truck.
However, GM is planning to launch more EVs and increase its capacity in order to be able to compete in the fast-growing EV market.
Now, Barra and other GM executives are turning up the volume on their argument that GM has a better long-term plan, and is ready to move faster in response to the growing demand for electric vehicles.
She added that offering affordable EVs is the key to the company’s plans.
GM is said to planning to release a US$30,000 electric Chevrolet Equinox next year and it’s working on another low-priced EV after that.
During the fourth quarter, GM built almost no electric vehicles in North America because of a battery recall that shut down the production of Chevrolet Bolt EVs.
Barra, however, said that this year and the next, GM plans to deliver about 400,000 EVs in North America and 20 EV models in North America and 30 globally by the year 2025.
Adam Jonas, an analyst at Morgan Stanley asked Barra during a call on Tuesday if the aforementioned report meant that GMM will have a lot of low-volume EVs on the market.
“We think several of those models are going to be over 100,000 units (annually) or more than that,” Barra said.
GM’s 2022 profit outlook also reflects challenges from rising costs. GM said it expected $2.5 billion in additional logistics and commodities costs this year, and $1 billion less in profits from its financing unit. GM’s added production in 2022 also will include more lower-margin vehicles, Jacobson said.
But the company will increase spending and hire some 500 more staff at its Cruise robo-taxi unit which earlier Tuesday announced it will receive some US$1.35 billion in investment from Softbank Group Corp in other to launch its commercial autonomous ride services across the United States.
The fourth-quarter net income of GM was about US$1.67 billion and operating profit was about US$2.8 billion. The company’s net income margin in the quarter has dropped to about 5.2% unlike its full-year net margin of about 7.9%.
The automaker’s vehicle sales and market share declined in 2021, while EBIT-adjusted margins jumped as GM focused on sales of more profitable pickups and SUVs.
Also, the company’s shares dipped in after-hours trade before recovering to about US$54 just above the closing price of US$53.95.