The largest US automaker posts record earnings. GM does not scare customers with the increased prices. But with the switch to electric cars, the trend could turn – a global discount battle is raging in the segment. Experts fear the repetition of a fatal mistake.
At car manufacturer General Motors, the concentration on the sale of particularly lucrative vehicles is bearing fruit. Adjusted operating profit climbed by more than a third to $3.8 billion in the fourth quarter of 2022, the company said. Thanks to higher sales prices and increased sales, the Detroit group managed to offset higher logistics and raw material costs. For the current year, the board of directors around CEO Mary Barra announced an operating result in a range between 10.5 and 12.5 billion dollars, more than analysts had hoped for in view of the expected downturn.
However, that would still be noticeably less than last year. In the end, there was a record operating result of 14.5 billion dollars on the books, which was only slightly higher than the year before. Sales climbed by almost a quarter to around $157 billion. The average selling price per vehicle hit a record high of $51,000 as General Motors focuses on producing higher-margin vehicles.
At the same time, the group is investing heavily in electromobility. Before releasing the numbers, the automaker said it would invest $650 million in Lithium Americas. Together they want to develop a lithium mine that is considered the largest known source of the important battery raw material in the United States. GM expects EV sales to hit $50 billion by mid-decade. According to the information provided, the pre-tax margins are likely to be in the low to mid-single digits.
GM also confirmed plans to build a fourth battery factory in the United States. However, no details were given about the time of construction.
GM and local rival Ford are currently under pressure in their home market because Tesla has massively reduced the prices for its electric cars. Ford followed suit earlier this week, capping prices on its Mustang Mach-E SUV by up to $5,900. The number two in the USA also attracts customers with favorable financing conditions. In China, manufacturers Xpeng and Seres have also reduced their prices in response to Tesla.
Analysts expect a price war should the price cuts spread widely. Experts are reminded of the times more than ten years ago, when American car companies drove each other into a crisis with a ruinous discount battle. At that time, GM and Chrysler had to be rescued from collapse with the help of the state.
