Release Date: July 23, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Record revenue in both the second quarter and first half of 2024.
- US EV deliveries grew 40% year over year in the second quarter.
- Stable pricing with incentives more than 100 basis points below the industry average for four consecutive quarters.
- Chevrolet Silverado and GMC Sierra volumes in the US were up a combined 5% versus a year ago.
- Strong performance from the ICE business and stable pricing across the portfolio.
Negative Points
- Reported a loss in China and expect the rest of the year to remain challenging.
- Higher marketing spend expected in the second half of the year.
- EV volumes are expected to build sequentially, but mix will be a bigger headwind in the back half of the year.
- Decision to pause the production of Cruise Origin triggered a charge of roughly $600 million.
- Assuming a bigger pricing headwind in the second half of the year.
Q & A Highlights
Q: Can you provide context on the pricing strength seen in Q2 and its sustainability?
A: Paul Jacobson, CFO: We've been disciplined in our commercial strategy, maintaining strong demand for our vehicles. Despite some year-over-year pressure on incentives, we've widened the gap against competitors. Our truck sales were up 5% in the quarter, and we continue to pick up share. We expect this trend to continue due to our strong portfolio and disciplined inventory management.
Q: How does the potential change in regulatory environment affect GM's EV strategy?
A: Mary Barra, CEO: Our strategy is to offer consumers choice with both EV and ICE vehicles. We believe the market for EVs will continue to grow, and we have the flexibility to adjust based on consumer demand and regulatory changes. Regardless of the regulatory environment, we are well-positioned with our portfolio.
Q: Can you elaborate on the second half pricing assumption and its sensitivity to volume changes?
A: Paul Jacobson, CFO: We focus on our own pricing strategy, assuming a 1% to 1.5% year-over-year decline in the second half. Despite this, July pricing looks similar to June. We manage our portfolio with conservatism to ensure continuity in cash flow and margin performance.
Q: What is the rationale behind switching from the Cruise Origin to the Bolt EV for autonomous vehicles?
A: Mary Barra, CEO: The switch eliminates regulatory risks associated with the Origin, which doesn't meet motor vehicle safety standards. The Bolt EV has proven to be a good product for initial rollout, allowing us to be more capital efficient and scale faster without regulatory uncertainty.
Q: What steps are being taken to address the challenges in the China market?
A: Mary Barra, CEO: We are aligning production to current retail realities, reducing inventories, and aggressively cutting structural costs. We are also launching new products and leveraging our premium channel for exports. Despite the current challenges, we believe in the long-term growth potential of the China market.
Q: How is GM Financial performing, and what are the trends in credit and delinquencies?
A: Dan Berce, CEO of GM Financial: GM Financial had a strong first half, earning $1.6 billion. Prime customers, who make up 75% of our portfolio, are performing well. We have seen some deterioration in less-than-prime customers from 2022 and 2023 vintages, but recent trends show stabilization.
Q: What is the outlook for emissions compliance and the role of hybrids in GM's portfolio?
A: Mary Barra, CEO: We have multiple levers to comply with emissions regulations, including portfolio planning, technology, and credits. We plan to have hybrids in key segments by 2027 to meet regulatory requirements and consumer demand.
Q: How does GM plan to manage EV inventory levels and achieve variable profit positive in the fourth quarter?
A: Paul Jacobson, CFO: We are focused on balancing production with demand to avoid residual value issues. We aim to achieve variable profit positive in the fourth quarter by improving manufacturing scale, reducing cell costs, and optimizing vehicle mix.
Q: What are the key drivers for GM's strong performance in North America?
A: Mary Barra, CEO: Our strong performance is driven by a robust portfolio, disciplined inventory management, and stable pricing. We continue to see strong demand for our trucks and SUVs, and our new midsize SUVs are generating higher profit margins.
Q: What are the expectations for GM's EV customer base growth?
A: Mary Barra, CEO: We expect the growth of new GM customers in the EV segment to continue, driven by our fresh designs, performance, technology, and range. The response to our new models, like the Chevrolet Equinox EV, has been very positive, and we are well-positioned to capture more market share.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
