“GM will achieve a new high in future revenue through strategic cooperation, new energy vehicle layout and autonomous driving.”
Author: Coco Cheung
Produced by: Financial Graffiti
Recently, General Motors (GM.US) released its third-quarter financial results. According to the financial report, GM’s total revenue in the third quarter was 41.889 billion US dollars, a year-on-year increase of 56.42%.
Among them, the main business automobile sales revenue was 38.703 billion US dollars, accounting for 92.39% of the total revenue. The total cost was US$38.497 billion, up 53.17% year-on-year, and the operating income was US$3.392 billion, up 106.2% year-on-year. Meanwhile, gross profit margin for the quarter was 7.76%. Ultimately, adjusted net profit attributable to shareholders was $3.305 billion, or $2.26 per share, or $2.25 on a diluted basis.
GM is divided by geographic location into GM North America and GM Overseas. Among them, North America generated $34.691 billion in revenue this quarter, while overseas markets generated $3.98 billion.
By business, GM is divided into auto and spare parts sales, used cars and auto repair services. The auto and parts sales segment had revenue of $37.363 billion in the quarter, the used car segment had revenue of $155 million, and the auto repair service segment had revenue of $1.185 billion. The driving force of this rapid growth is the simultaneous increase in sales volume and price.
Among the many models, the high-margin model is the Cadillac Escalade. The Chevrolet Bolt EV and EUV achieved record sales, and the Ford Mustang Mach-E beat expectations by 50 percent.
As of the end of the third quarter, the company’s production has increased by 80% compared with the same period last year, and 75% of the inventory stranded at the end of the second quarter due to lack of spare parts has been shipped. This partially offsets the logistics risks and losses represented by the Mexico region.
At present, the inventory of GM dealers has been much lower than the historical level, and the inventory turnover days are still only around 20 days. During the third quarter, company costs were $350 million, primarily driven by strategic growth initiatives. As of the end of the third quarter, the market share in North America was 15.6%, up 340 basis points from the same period last year.
GM expects that the cost of bulk commodities and logistics for the whole year of 2022 will be about US$5 billion, and the sales volume of intermediaries will increase by 25%-30% compared with the same period last year, which will increase the EBIT in North America by about 10%.
It is worth noting that despite the impact of risk control, GM China is also in good spirits, and the business has returned to profitability. In addition to working with suppliers to improve efficiency and reduce risks, in the new fiscal quarter and fiscal year, GM will achieve a new high in future revenue through strategic cooperation, new energy vehicle layout and autonomous driving.
GM’s BrightDrop commercial electric vehicle, which was launched in 2021 to provide first- and last-mile transportation, will be produced at the CAMI assembly site and will be upgraded in 2023 to meet the needs of customers such as Walmart, FedEx and Merchants Fleet. BrightDrop also put into operation an electronic vegetable basket tracking system last month, which has greatly accelerated online grocery shopping. Kroger supermarket is the first customer of GM. In addition, General Motors and Hertz Car Rental reached a strategic agreement to provide 175,000 new energy vehicles in the next five years.
In terms of new energy battery solutions, GM has cooperated with LG Energy Solution for the first time to integrate each other’s advantageous technologies. The new production facility in Ohio will cover more than 30 football fields and will employ more than 1,000 people. This will not only improve GM’s gross profit margin, but will also increase the production capacity of new energy vehicles in the United States and China to 1 million units by 2025.
From the perspective of new energy layout, it mainly focuses on the vertical integration of the industrial chain and the construction of production bases to achieve large-scale mass production to meet market demand.
GM will first transition the production of Cadillac LYRIQ and GMC HUMMER new energy vehicles to the Ultium Cell production base invested and established by GM in Ohio. Meanwhile, Factory Zero for mass production and the CAMI assembly center in Ramos Arizpe, Mexico, will be put into use in 2023 and 2024, respectively. Two additional Ultium Cell production sites are also under construction and are expected to start production of GMC HUMMER new energy vehicles, Chevrolet Silverado, Equinox and Blazer new energy vehicles, and BrightDrop commercial electric vehicles in 2023 and 2024 to meet growing demand.
GM plans to produce about 400,000 new energy vehicles for North America in the first half of 2022, 2023 and 2024, and aims to exceed 1 million by 2025. For the growth plan beyond 2025, management stated that it will be achieved through strategic cooperation with supply chain and direct investment in natural resource recovery, treatment and reuse. The US government’s new clean energy tax rebate policy will undoubtedly help GM’s strategic planning, which will greatly help them expand the domestic industrial chain and improve the acceptance of new energy vehicles. At the same time, GM also plans to increase the production capacity of Bolt from 44,000 units in 2022 to 70,000 units next year, taking this opportunity to guide loyal Bolt users to use new energy vehicles and make new energy vehicles the target of their repurchase. . The consumer base for Bolt EVs and EUVs will exceed 200,000 by the end of next year. The GMC brand will also have three truck models in the market.
In terms of autonomous driving, the driverless cruise system has been used for more than 400,000 miles in San Francisco, and thousands of members of the public have tried the service. In September, commercial driverless operations entered two new markets, Austin and Phoenix. GM is on track to commercialize driverless services and freight by the end of the year, and map navigation system usage is as expected.
Next year, GM will enter the self-driving scale phase and achieve meaningful profitability.
In addition, in all strategic transformation and upgrading, new energy batteries and cruise systems are also important links to increase gross profit margins.