General Motors EV Production Figures in 1H 2023 Were Weaker Than Expected
On July 25, General Motors Company (NYSE: GM) reported better than expected 2Q 2023 results. Diluted 2Q 2023 EPS was US$1.91, beating analysts’ consensus projections of US$1.85. GM recorded US$1.14 of adjusted diluted EPS in the year-ago period. Similarly, 2Q 2023 revenue of US$44.7 billion handily exceeded both 2Q 2023 analysts’ projections (US$42.6 billion per Refinitiv) and 2Q 2022 levels (US$35.8 billion).
In addition, GM announced plans to cut operating costs by a further US$1 billion to a total of US$3 billion through the end of 2024. Reductions in salaried employment and market spending will comprise the bulk of these incremental cuts.
Based on the good 2Q 2023 results and the further planned trimming of costs, GM boosted its full-year 2023 adjusted EBIT and diluted adjusted EPS guidance ranges to US$12 billion-US$14 billion and US$7.15-US$8.15 from previous US$11 billion-US$13 billion and US$6.35-US$7.35, respectively.
GENERAL MOTORS COMPANY
| (in millions of US $, except for EPS and shares outstanding) | 2Q 2023 | 1Q 2023 | 4Q 2022 | 3Q 2022 | 2Q 2022 |
| Automotive Revenue | $41,254 | $36,646 | $39,835 | $38,703 | $32,614 |
| Operating Income | $2,761 | $2,606 | $3,038 | $3,392 | $1,689 |
| Diluted Adjusted EPS | $1.91 | $2.21 | $1.39 | $2.25 | $1.14 |
| Operating Cash Flow | $7,591 | $3,086 | $5,624 | $5,315 | $3,000 |
| Cash – Period End | $32,630 | $28,208 | $31,303 | $30,311 | $17,908 |
| Automotive Debt – Period End | $16,425 | $16,354 | $17,844 | $18,783 | $16,909 |
| Shares Outstanding (billions) | 1.4 | 1.4 | 1.4 | 1.5 | 1.5 |
GM’s improved revenue and bottom-line numbers trace to GM’s aggressive pricing strategy. Its 2Q 2023 average per vehicle transaction price was US$52,248, up from US$50,648 in 1Q 2023, and from US$50,348 in 2Q 2022. GM has taken a different tack in this regard than Tesla, Inc. (NASDAQ: TSLA), which has cut model prices many times in 2023 to protect its leadership position in the North American EV (electric vehicle) industry.
One caveat to GM’s 2023 financial guidance is that its labor agreements with 150,000 workers in the United Auto Workers and the Canadian Unifor unions expire September 14. A strike would obviously impact the company’s potential 2023 earnings and cash flow. While these unions are separate from the Teamsters union which reached a tentative deal with United Parcel Service, Inc. (NYSE: UPS) last week, thereby avoiding a costly strike, it is hoped that the auto labor unions and GM’s management will likewise be able to find middle ground. A 40-day strike in 2019 cost GM US$3.6 billion.
GM reached its internal goal of producing more than 50,000 EVs in the first half of 2023, but that was a much slower pace than many analysts expected. Most of the EVs produced were the lower-priced, legacy Chevrolet Bolt, not the much higher-priced Silverado EV Work Truck or the Chevrolet Blazer EV. Surprisingly, GM announced on July 25 that it will introduce a next-generation Bolt model; previously GM planned to retire the brand.
An unnamed automation equipment supplier constrained “module assembly capacity” for models that use GM’s “Ultium” batteries and technologies. CEO Mary Barra said this issue has now mostly been resolved.
GM reiterated plans to manufacture 100,000 EVs in the second half of 2023 and expects even a faster production pace in 2024. While these projected increases are impressive, GM will still produce a far smaller quantity of EVs than Tesla does for some time to come. Tesla produced 479,700 EV models in 2Q 2023 alone.
General Motors shares traded about 3.5% lower on its 2Q 2023 earnings report, possibly due to the disappointing 1H 2023 EV production results. Nevertheless, the stock, which trades at a P/E ratio of only 5x 2023 earnings (based on the midpoint of company guidance), looks inexpensive. The stock has rallied off a US$31.50 low in mid-May but is still down 12% since mid-February.
General Motors Company last traded at US$38.05 on the NYSE.
Information for this briefing was found via Edgar and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
