Experts: GM in position of strength with EVs compared with rival Ford

Wall Street analysts exhaled the day after General Motors held its long-awaited investor presentation, with many shareholders believing GM has the better bet on making electric vehicles profitable than Ford Motor Co. does in the near term. But GM still faces challenges.

At its investor day held Tuesday in Tennessee, GM promised to deliver financial results in 2025 that are consistent with this year as it brings down structural costs and shifts its all-electric vehicles from the red toward the black.

Wall Street rewarded GM Wednesday for the news with daylong gains in the stock price, which closed at $47.93, a 4.17% gain.

“The event lacked major drama, which was a good thing,” said Morningstar Auto Analyst David Whiston of GM’s investor day. “And, seeing 2025 similar to 2024 is not bad news given all the macro uncertainty out there.”

But CEO Mary Barra still must deliver. GM has promised EVs will be “variable profit positive,” which will in part depend on GM’s ability to bring down battery costs. Also, GM and its partners in China have to restructure the business there to reverse $104 million in losses in that region last quarter. And GM must get its self-driving subsidiary Cruise into a moneymaking position.

Last year, Cruise faced a crisis after a pedestrian in San Francisco was dragged by one of its self-driving cars. GM halted use of its Cruise autonomous vehicles and only recently has it begun to roll out operations again with a small fleet of human-monitored vehicles in some parts of the country. Barra assured investors that GM will be disciplined with its investments in Cruise and will provide updates including “updates on our ongoing discussions with potential partners.”

“There was hardly any mention of China and Cruise as I think there’s just nothing new for now,” Whiston said.

GM must show it is a ‘formidable player’ in EVs

Dan Ives, managing director at Wedbush Securities, said the lack of discussion on Cruise is wise because it’s still “a third-rail issue,” meaning “there are more questions than answers around Cruise right now.”

“China continues to be a very difficult market, not just for GM but everyone else,” Ives told the Detroit Free Press. “Less is more in terms of GM talking about China right now. But it definitely feels like there’s a solidified strategy there.”

GM’s overall messaging left most investors upbeat, in part due to their frayed nerves going into it.

“Investors were fearing a rip-the-bandage off moment of GM pushing off EV profitability and changing strategy, but this feels like a very confident GM, and I think that’s why the stock is up,” Ives said Wednesday.

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Ives said GM now must deliver the long-promised profits on EVs.

“It feels like they’re confident coming into the next phase, which is coming in as the No. 2 EV player in the U.S. and solidifying it and getting it to profitability,” Ives said. “The next phase is for GM to show they are going to be a formidable player in EVs.”

Still others came away from the event believing GM’s gasoline-powered business is running fine all cylinders, but the transition to EVs remains in flux.

“GM delivered a polished message … once again demonstrating its solid execution on North America (gasoline-powered) SUVs/trucks especially in the context of Ford and Stellantis encountering major setbacks recently (inventory, pricing, warranty, etc…),” wrote Edison Yu of Deutsche Bank in research notes Wednesday. “Naturally, the (internal combustion engine) business appears stronger for longer in our view while the EV strategy likely still requires some fine-tuning amidst slower adoption rate.”

Yu said GM’s outlook that its 2025 financial results will be flat with this year “provides some comfort to investors expecting a decline.” But he noted a large portion of GM’s savings next year involve lower EV losses of $2 billion to $4 billion.

“Management did not provide a lot of substantive details around that, citing in part uncertainty around the election,” Yu wrote. “We believe volume will remain a key variable factor to the cited EV tailwinds, as management’s message centers around flexibility in manufacturing to meet end customer demands.”

Better positioned than Ford

Tesla is the top seller of EVs in the world, having sold 462,890 vehicles in the third quarter, with Chinese EV maker BYD second. But in the United States last quarter, GM sold 32,095 EVs, making it the No. 2 EV seller here. Ford sold 23,509 EVs.

Ives said GM will likely never top Tesla, but if it can lock in second or third place, that would make it a serious contender. After bragging about moving up to the second spot, Barra told investors that GM’s EV losses “have peaked this year and we’re focused on significantly improving profitability next year.”

She said GM is on track to produce 200,000 EVs in North America this year and the EV portfolio will reach positive variable profit — meaning the revenue GM earns from selling the vehicle exceeds the direct cost of producing it — this quarter. GM CFO Paul Jacobson told investors there should be a $2 billion to $4 billion profit improvement from EVs next year.

Mike Ward, managing director of research of Freedom Capital Markets, told the Free Press that he was pleased by GM’s consistent message. He puts them in a winning spot with EVs compared with crosstown rival Ford. Ward said Ford’s Model E, which is its electric vehicle division, is expected to generate a loss of about $5 billion this year. Ward estimates the division will lose $4.5 billion next year.

“That loss is in line with Rivian and Tesla at this point of the life cycle,” Ward told the Free Press. “GM is in better shape, owing in part” to its battery production with LG Energy Solution in Ultium Cells LLC.

Cutting the cost of EVs

GM said Tuesday it was dropping the Ultium brand name, except for its use with the Ultium Cells joint venture. GM is making that move so that GM can use other types of technology, at lower cost, in its EVs. Kurt Kelty, a former Tesla executive who is now GM’s vice president of batteries, announced plans Tuesday to adopt lithium iron phosphate battery technology to cut the cost of GM’s EVs by “up to $6,000,” he said.

GM uses the more common nickel cobalt manganese batteries in its Ultium platform. But Tesla and Ford already use lithium iron phosphate-based cells, which are less expensive to produce than nickel cobalt manganese batteries, according to The Verge.

Also on Tuesday, GM President Mark Reuss said the next generation Chevrolet Bolt EV will be a “moneymaker” and launch late next year. GM will offer it in various models, including a lower-priced version. Reuss said the price is expected to start slightly higher than the previous $28,785 Bolt EUV, but it will charge faster.

Morningstar’s Whiston, who covers GM and Ford, said GM’s EV business is in a stronger position than Ford at the moment.

“I’ve long thought GM was in a better position on EVs because they spent more time to develop things from scratch with dedicated EV platforms and moved faster on battery plant partnerships,” Whiston said. “You can’t compare directly since GM doesn’t disclose its EV business like Ford does, but getting to variable profit by end of this year is a good accomplishment and suggests things are progressing well at GM.”

A drop in prices

Ford profitability on EVs continues to be a moving target, Ives said.

“For GM they put the lines in the sand in terms of what they need to have happen (with EV profitability) and it shows it’s not going to an endless pit of spending,” Ives said.

The downside from the meeting, for Whiston, was GM’s assumption that new-car prices will decline next year, eroding profits.

“But that fear keeps being unfounded. Pricing probably will eventually keep coming down, but they’ve done a good job driving demand for higher level trims and excessive discounting hasn’t been necessary,” Whiston said. “That means they have leeway to raise incentives as industry pricing falls and possibly still stay below industry average incentives.”

More: Ford employees officially move into new offices at Michigan Central Station

More: GM drops Ultium name, says it will build a new battery center and EVs will be profitable

Contact Jamie L. LaReau: jlareau@freepress.com. Follow her on Twitter @jlareauan. Read more on General Motors and sign up for our autos newsletter. Become a subscriber.

This article originally appeared on Detroit Free Press: Experts: GM’s EV business in stronger position than Ford

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