Text size
General Motors
believes an EV inflection point is coming in the U.S. The company plans to get more than its fair share of the new business, and if everything works out as management hopes, shareholders will be winners.
Tuesday, GM (ticker: GM) CFO Paul Jacobson updated analysts and investors about the car maker’s plans at a conference in New York, just before the city’s annual auto show kicks off. He reiterated that his company aims to sell 1 million EVs in North America annually by 2025—a plan that will require an enormous boost in output.
“As you see us getting into in 2022 and into 2023, you’re already starting to see that ramp up really fast,” said Jacobson, highlighting recent new EV products like the GMC Hummer and Cadillac Lyriq that are already on sale. In 2023, GM will bring out a Chevy Silverado pickup truck and Equinox crossover vehicle.
“You’re going to start to see EV production really, really take off exponentially,” added the CFO. Sales of battery-electric cars totaled about 25,000 in 2021, so GM would have to increase its volume about 40-fold to meet the 2025 target.
The bold goal has dramatic implications for the industry. GM ended 2021 shipping almost 2.6 million vehicles, for a North American market share of about 14%, in line with the roughly 14% to 16% it has achieved over the past few years.
If GM maintains that slice of the pie, it implies the U.S. market for battery electric vehicles would be about 6 million to 7 million units in 2025. That is up from less than 500,000 battery electric cars sold in 2021. At that level, EV penetration of the North American new-car market would be up to 40%, about double what analysts currently project.
If EV penetration isn’t that high, then GM would have to take a bigger share of the market to meet the 2025 goal of a million vehicles a year.
For perspective, Wall Street analysts expect
Tesla
(TSLA) to be shipping about 3.6 million vehicles globally by 2025. Perhaps one third of those would be in North America, so if analysts are right about Tesla and GM hits its goals, then GM would be close to Tesla’s size in North America by then.
Either result—higher penetration or a growing market share—would be good news for GM investors.
GM believes EVs will be profitable, too. The company’s long-term forecasts for sales and margins imply operating profit of about $36 billion by 2030, up from the near $14 billion projected for 2022. That represents average annual earnings growth of almost 13% between now and the end of the decade.
Apple
(AAPL), meanwhile, has increased its operating profit at about 10% a year on average for the past eight years.
Apple
stock trades for about 27 times estimated per-share earnings for calendar 2022, while GM stock trades for about 6 times earnings.
“The market doesn’t actually necessarily believe [earnings guidance] yet, which is understandable, right?” Jacobson said. He understands that the market will start to believe if GM hits some of its ambitious goals.
GM stock was down 0.5% in late trading Tuesday. The
S&P 500
and
Dow Jones Industrial Average
fell 0.3% and 0.2%, respectively.
Write to Al Root at allen.root@dowjones.com
Read More: GM’s Profits Could Rise Faster Than Apple’s. Its EV Plans Are the Key.