SUV/Truck Margins, Higher EV Production Rates Bolster Q3 for GM

• GM’s third-quarter US market share was up 0.5 points while its gap on incentive spending below the industry average grew by more than two points.

• The automaker plans to “return excess free cash flow” to shareholders by buying back “about 125 million shares” to reduce outstanding shares to below 1 billion by early next year.

• GM delivered 32,000 EVs in the US in Q3, returning it to second place in the segment after Tesla. It claims EV incentives 11 points below the EV segment average and a 9.8% share of the US EV market as of last quarter.

Increased profit margins on its midsize three-row SUVs (Chevrolet Traverse, Buick Enclave, and GMC Acadia), falling costs to build electric vehicles, and lower incentives on everything propelled General Motors to a great day on Wall Street Tuesday.

By mid-afternoon its stock price was up nearly 10% to $53.84 per share. Compare that with the end of last year, when the company, chastened by failure to launch several EV lines in volume due to production problems, contributed to GM stock falling below $30 per share. This afternoon, GM stock slipped to $52.54.

The automaker anticipates similar success off its refreshed full-size SUVs (Chevrolet Tahoe/Suburban, GMC Yukon/XL, and Cadillac Escalade) launching this quarter.

GM’s third-quarter US market share was up 0.5 points while its gap on incentive spending below the industry average grew by more than two points, the automaker said in releasing its third-quarter results on Tuesday.

Share buyback surely had something to do with GM’s stock performance. The automaker plans to “return excess free cash flow” to shareholders by buying back “about 125 million shares,” according to Chief Financial Officer Paul Jacobson, to reduce outstanding shares to below 1 billion by early next year.

But its long-term strategy integrating EV development with the overall business, to balance those costs with internal-combustion-model profits—an advantage Tesla has never had—appears to be paying off. GM expects to reduce battery pack costs by $60 per kilowatt hour in 2025 and by another $30 per kWh in 2026.

Crosstown rival Ford, by contrast, is relying on a “skunkworks” to develop its next-generation EV platform, which would be its first to underpin a wide variety of its models.

Ford has split its business into three divisions, with great success for its commercial truck business separated from its lukewarm ICE vehicle sector, all offset by the money-losing Model e all-electric business.

GM expects to produce about 200,000 EVs in North American factories in 2024, though actually on the low end of the 200,000 to 300,000 EVs that CEO Mary Barra projected when she addressed Wall Street analysts after the company’s fiscal year 2023 financial report in January.

The automaker said it is out of the woods from its EV production launch problems of last year, but still far off its now-forsaken goal of producing 1 million EVs in North America next year.

Among its Q3 highlights, GM delivered 32,000 EVs in the US, returning it to second place in the segment after Tesla. It claims EV incentives 11 points below the EV segment average and a 9.8% share of the US EV market as of last quarter.

GM’s new ICE and EV models “are more profitable than the outgoing models,” CEO Mary Barra told the investment analysts on the call.

With GM’s continuing advancements at the cellular and modular battery level and its procurement of key materials at lower commodity prices, it “will be years before competitors will match” the company, she said.

GM also will maintain a favorable model “mix” with its EV portfolio, Jacobson said. This is an important metric for Wall Street because “mix” is how it measures sales of expensive, high-profit premium models against low-profit commodity cars.

Jacobson points to the Cadillac Escalade IQ, Optiq, and Vistiq EVs coming up for launch as the 2025 Chevrolet Equinox EV and next Chevy Bolt, due in late 2025, hit the low end of the EV market.

GM’s only third-quarter stumble came in its Chinese auto joint-venture performance, where net revenue fell more than 50% versus Q3 2023, from $9.6 billion to $4.5 billion.

GM’s equity income came to a net loss of $100 million for Q3, which matches its loss for each of the first two quarters, and sales fell to 372,000 in China for the quarter, down 37% year-over-year.

“We believe we can turn that around, or better,” Barra said, after meetings the company has scheduled with Chinese joint-venture partners in the fourth quarter.

GM in China will “prioritize profitability over volume,” she said, noting early success in the number of orders for the 2025 Chevy Tahoe there, and continued success of its Buick GL8 premium minivan, which is “doing very, very well.”

For the third quarter, GM posted $4.1 billion in adjusted earnings before income tax on $48.8 billion in revenue, better than financial analysts had expected and up year-over-year from $3.6 billion EBIT off $44.1 billion in revenues.

GM expects an adjusted EBIT of $14 billion to $15 billion for the full year ending Dec. 31, up from $13-15 billion previously expected.

Does GM’s third-quarter performance change your outlook for the US EV market? Please comment below.