General Motors is reducing its electric car production target for this year and altering the timing of its profit targets because demand for EVs is not increasing at the rate anticipated. GM CFO Paul Jacobson announced Tuesday that the company’s goal output of new EVs in 2024 will be reduced from 200,000 to 300,000 to 200,000 to 250,000 units.
Jacobson stated that GM still believes its EVs may be “variable profit positive” at “low 200,000” production levels. GM promised investors earlier this year that it will generate variable profit from EVs by the second half of the year. Variable profit occurs when GM’s revenue from vehicle sales surpasses its direct production costs.
The formula ignores corporate or “fixed” expenditures, focusing solely on the car’s costs and direct revenue.
“We think we can still do that in, probably Q4 more than the second half,” Jacobson said of achieving variable profit positive. “But we still think that’s an achievable goal going forward.”
Jacobson, speaking Tuesday at the Deutsche Bank Global Automotive Industry Conference, also said that GM will invest $850 million in Cruise, its self-driving car company, beginning this month to help relaunch it.
Despite slower-than-expected EV demand growth across the industry, Jacobson reported robust EV sales in May, with GM selling approximately 9,500 Evs.
He stated that the change to production and profit-time targets is “100% demand-driven” and dependent on the overall industry. He stated that most industry analysts believe the EV market would account for over 10% of total auto sales this year, but GM expects it to be around 8%.
“On the supply side, we’ve resolved the battery module concerns.
“We were on track to produce 300,000 vehicles this year,” Jacobson explained. “We’ve been very consistent in developing a platform and growing EVs from it in a way that satisfies customer expectations. We don’t want to overproduce and create excess inventory due to a lack of market demand. Then offer deep discounts.”
