GM's Q2 2024 Earnings Call

[00:00:00] Good morning and welcome to the General Motors Company's second quarter 2024 Earnings Conference Call. During the opening remarks, all participants will be in a listen-only mode. I would now like to turn the conference over to Ashish Kohli, GM's Vice President of Investor Relations. Thanks, Amanda, and good morning everyone.

[00:00:19] We appreciate you joining us as we review GM's financial results for the second quarter of 2024. Joining us today are Mary Bara, GM's Chair and CEO, and Paul Jacobson, GM's Executive Vice President and CFO.

[00:00:33] Dan Burst, President and CEO of GM Financial will also be joining us for the Q&A portion of the call. On today's call, management will make forward-looking statements about our expectations. These statements are subject to risks and uncertainties that could cause their actual results to differ materially.

[00:00:50] These risks and uncertainties include the factors identified in our filings with the SEC. Please review the safe harbor statement on the first page of our presentation as the content of our call will be governed by this language.

[00:01:16] Hello everyone and welcome to Kilowatt, a podcast about electric vehicles, renewable energy, autonomous driving, and much much more. My name is Bodey and I am your host. And as you probably already know, we are going to talk about GM's Q2 2024 Earnings Call.

[00:01:32] Now I'm going to be honest, a lot of this earnings call was businessy and financial, which is rude. I'm not going to lie. It was very rude on GM's part. But I did pull the clips that I think were worth mentioning.

[00:01:45] So let's go ahead and get into those. We're going to start off with Mary Bara, the CEO of GM General Motors. We're going to start off with her opening remarks. I significantly cut this down only to involve her remarks in regards to EVs.

[00:02:01] So let's go ahead and listen to that. I want to begin today's call by thanking the GM team, as well as our dealers, suppliers, and other business partners for helping us deliver strong second quarter and first half results, including record revenue in both periods.

[00:02:16] There are four key drivers to our performance and our new hire guidance that I'd like to highlight. First, our past investments have created a consistently high performing portfolio of ICE trucks and SUVs from a volume, share, and margin standpoint.

[00:02:31] Next, our EV portfolio is scaling well and gaining market share. In fact, our US EV deliveries grew 40% year over year in the second quarter while the industry grew at 11%. We're encouraged by these early results because discipline volume growth is key to earning positive variable profits

[00:02:48] from our EV portfolio in the fourth quarter and maintaining strong ICE margins. Third, we continue to deliver stable pricing and our incentives on average have been more than 100 basis points below the industry average for four consecutive quarters.

[00:03:03] And finally with our new investments, we have even greater focus on margins and capital efficiency. As I said before, our EV portfolio is growing faster than the market now that our module issues are resolved and we are scaling production. Our early sales are mostly incremental.

[00:03:18] About 54% of customers are new to GM and we're working to increase our conquest rate by raising awareness and launching new models. Our best-selling EV so far this year is the Cadillac Lyrit and it is now the market leading luxury EV in 22 states including Florida, Texas, and Michigan.

[00:03:36] The GMC Hummer EV and the Chevrolet Blazer EV are also building momentum. To unleash the next cycle of EV growth, we're scaling production of the Chevrolet Equinox EV with its unique combination of performance, technology, range and affordability.

[00:03:51] We delivered our first thousand units late in the second quarter and the reaction from customers, dealers, and the media is very strong. One product reviewer said, Chevy seems positioned to grab a piece of the pie that no one else has quite

[00:04:04] grabbed onto yet and we think that is spot on. Then over the next several months GMC will launch the Sierra EV and the Cadillac Lyrit will be joined by the Optic, Escalade IQ and Celestic. We're especially excited about the Optic.

[00:04:18] Current driver said it nails the compact luxury SUV formula. Then next year when we follow with the Vistik, Cadillac will have a beautifully designed EV in every global luxury SUV segment.

[00:04:30] We're going to focus on winning new customers with these name plates as well as with the next generation Chevrolet Bold EV because they represent the largest growth opportunities for us. But we've also made adjustments to ensure we have a balanced approach as the market develops.

[00:04:44] This includes deferring Buick's first EV which had been planned for 2024. As we're expanding choice, other barriers to EV adoption like public charging access are also improving. We are working to finalize commercial agreements with Tesla to give our customers access to their charging network.

[00:05:01] The Iona fast charging venture we joined is expected to bring its first chargers online before the end of the year and customers are telling us the drive-through plazas we're rolling out with Pilot Company are the best public charging experience out there.

[00:05:15] As excited as we are about our portfolio, we are committed to growing responsibly and profitably in any demand environment. Over the next few years, third party forecasters now see the EV market growing steadily but more slowly than it did over the last few years.

[00:05:30] As a result, we are adjusting our spending plans to make sure we're capital efficient and moving in lockstep with customers. For example, our Altium Cells Joint Venture continues to ramp up domestic battery cells supplied this year, which is helping drive profit improvement in our EV portfolio.

[00:05:47] As we go forward, we're going to bring additional capacity online in a measured cadence. This will enable us to better optimize our battery chemistry and form factors to meet our customers needs on cost and range.

[00:05:59] We've also decided to reopen the ORION assembly as a battery electric truck plant in mid-2026. The new timing is six months later than our plan heading into the year.

[00:06:09] We're confident that we can meet customer demand for standout EV trucks in the interim by leveraging the production capability and flexibility we have in Factory Zero. We will also continue to take advantage of the flexibility we have to mix production between ICE and EV at key plants.

[00:06:25] Okay, so stronger EV sales for GM and when I say stronger, that doesn't necessarily mean strong. It means stronger for GM companies like BYD or Tesla would look at GM's sales as a failure, but for GM this is really good.

[00:06:42] And I'm not trying to be negative here, although it does sound like I am being negative, but I'm not trying to be negative. I'm just saying in the grand scheme of things for GM, their sales are improving and rightfully so because GM has great products.

[00:06:55] The Equinox EV, they mentioned that one of the reviewers at the Equinox EV says that Chevy seems to be positioned to grab a piece of the pie that no one has quite grabbed yet.

[00:07:06] I think that's partially true. This is a $40,000 vehicle, Tesla Model 3, although it's not quite in the same class as an SUV. Technically, the Model 3 is a sedan and the Equinox I think is classified as a small SUV or crossover.

[00:07:29] Not quite the same thing, but you can still get an EV in that same price range. But more app comparison would be the Volvo EX30 which is Volvo's more affordable version of their most affordable EV, I guess, which is set to start at $36,000 for the single motor version.

[00:07:48] So it's right in that price range. I do think that GM is going to get a lot of competition because the EX30 is going to be a really nice car. And it's going to be really competitive with the Chevy Equinox.

[00:07:59] Let's see, Mary just briefly mentioned that they're working with Tesla and getting access to the Supercharger Network. No big update on that, so we'll just pass through that. They have had some positive response with their drive-through charging stalls at Pilot, which is great, especially when you're hauling something.

[00:08:21] I think that's super beneficial. It also seems to me that having a drive-through stall while probably maybe not the most space efficient way of doing things kind of lends itself to people getting in line.

[00:08:36] Like one of the problems at the Supercharger station is you have to back end if you have a Tesla and everybody's just kind of parked in different parking places around.

[00:08:46] It's a feel. You're getting a feel for who's next, and there's not, especially if you just pulled up and you're not aware of everybody waiting, there's no real clear indication of who's next.

[00:08:59] So when somebody drives away from the Supercharger, there's kind of a few moments of people kind of jockeying for position.

[00:09:07] Usually, the person who's been waiting the longest for that particular space, they usually get it. People are generally pretty polite in my experience, but it would be nice to kind of know who is really next. That would be good to know for sure. All right, let's see.

[00:09:24] Oh, they mentioned, I didn't put this in the clip, but they did mention that the Origin, which is their people mover that does not have pedals like gas and brake pedals, it doesn't have a steering wheel.

[00:09:36] So that project has been canceled. So what I thought we would do, because these clips, I'm going to take them out of order, there were actually two clips about the Origin. So I'm going to play them back to back and I'll come back with my comments.

[00:09:50] Thank you. Our next question comes from Joseph Spack with UBS. Your line is open.

[00:09:55] Mary, just on the Origin decision, obviously some cost savings, but I guess is there also, and I know I think you're still undergoing the strategic review for cruise, but does this also indicate a change in go to market strategy and sort of not having that purpose built vehicle?

[00:10:13] Like what were some of the other considerations is sharing just not really think viable for that business model or are there other use cases versus what you were originally planning for?

[00:10:25] Yeah, I think that the main reason is, you know, with going to switching from the Origin to the bull is we extinguish the regulatory risk. Remember, it's because the Origin doesn't have steering wheel and some other motor vehicle safety standard components.

[00:10:42] It doesn't meet motor vehicle safety standards. That requires a legislative change. We've been working on that. It's been difficult to get done and with that, if we don't get that legislative change or authorization from a government perspective, we're limited in the number of origins we could put out.

[00:11:01] So, as we looked at this, we thought it was better to get rid of that risk. And then, you know, when we look at the bull, it's been, I think, a very good product for the initial rollout from an AB perspective where we have over 5 million miles traveled.

[00:11:16] And it allows us to be more capital efficient and get better scale on the bull EV as we roll it out next year based on the LTM platform. So, I would say it was mainly driven by the uncertainty that we have from a regulatory perspective.

[00:11:33] Great. Thanks. And then as a quick follow up actually to Joe's cruise question, I understand that the pivot here to bolt, but I remember the decision to do Origin was largely an economic one. So just curious if you're still in tandem to the new approach, still going to continue maybe lobbying for this purpose built vehicle to regulators. Thanks.

[00:11:57] Yeah, we definitely will be looking for, you know, frankly, more than just what the vehicle is, but to have the right regulatory environment to release this technology that we believe definitely improved safety of miles traveled for everyone.

[00:12:14] So we're going to continue to work hard to continue to allow autonomous technology of rideshare and from a PAB perspective to continue. And frankly, you know, leverage switching to the bolt at this time because of the regulatory environment actually improves, increases costs.

[00:12:31] So we think it's a win-win, but you know, we're in the early, early phases of what rideshare is going to be and how we're going to leverage autonomous technology.

[00:12:40] I do think in the future there's going to be opportunity for a vehicle like the Origin. And so that remains open to us at the right time. This was about getting cost down at cruise and being able to scale without regulatory uncertainty.

[00:12:56] You know, this makes a lot of sense, especially when you consider where we are in, you know, American politics, for instance. You know, there's a lot of hot button issues. EVs and autonomous driving are definitely part of those hot button issues for sure.

[00:13:12] I don't think it's as bad as other people think it is. I don't think it's doom and gloom, but there's a lot of performative politics going on here in the United States. And I don't think that's very helpful in any way, shape or form.

[00:13:25] So if I was GM, I would not want to put a lot of effort into building something that didn't have pedals or a steering wheel and then trying to change the government's mind on whether or not you need pedals in a steering wheel.

[00:13:40] You know, it makes sense to just go ahead and move that on to the next generation of the bolt because that vehicle is going to be built on a new platform. It's going to be a really inexpensive vehicle or GM says it's going to be anyway.

[00:13:56] So this makes a lot of sense. Putting a lot of money into development and a lot of money into lobbying and trying to get rules changed at a time when we're still kind of looking at the future.

[00:14:10] So I think that's kind of in the infancy of autonomous driving. You know, somebody in the earnings call, I don't think I put it in here, but somebody in the earnings call said level two plus again, there is no level two plus.

[00:14:22] There's just level two. Level two plus is not a thing. That's just a marketing term saying, hey, our level two is more advanced than your level two and really, you know, they're all probably pretty close to the same with some exceptions.

[00:14:37] Because we are so far away, you know, 2030 might be really soon before we get full self driving to be honest. Yeah, this is a long drawn out way of me just saying this makes sense to me. Why put time and effort into this? All right.

[00:14:57] Next up, we are going to hear about GM what their thoughts are when they look ahead at the automotive market and the regulatory unknowns which in that is code for the US election because both presidential candidates have different feelings on EVs. What's GM's EV strategy?

[00:15:20] Let's listen to that. Our first question comes from the line of Dan Levy with Barclays. Your line is open.

[00:15:27] I'm going to ask about your EV strategy and this is in light of maybe some of the potential changes when we may be seeing in the regulatory environment given the upcoming election.

[00:15:39] You know, there's obviously one candidate in the US presidential election talked about pulling back the EV mandate and maybe there's some implications on things like IRA or EPA. So to what extent if we see pullback in some of these standards, does that modify your EV strategy?

[00:16:01] Is your EV strategy one that is driven more by regulation or do you view your EV strategy as a bit more fixed given the long term strategic goals of GM and also just the longer planning cycles for product? So thanks for the question.

[00:16:24] Our strategy is to offer our consumers choice. You know, we've got an incredible portfolio of vehicles both EV and ICE and we've got flexibility so we know we can win more customers as they embrace EVs.

[00:16:38] We're seeing that right now with 54% of the EV sales being new customers that are new to GM. And so we do think the market will for EVs will continue to grow and we've got the performance, the technology and the range that customers want,

[00:16:55] especially when you look at our portfolio with the equinox coming out right now, the affordability of that vehicle along with when we have the bolt next year, we're giving consumers that choice. And as I've said, EVs are fun to drive, instant torque.

[00:17:10] I think our EVs have beautiful designs, the right range, the right performance. So again, we'll be guided by the consumer and regardless of what the regulatory environment is, regardless, we're going to work to maximize because we've got that flexibility between ICE and EV.

[00:17:27] So I think we're in a very strong position. I think we also have to look at though, you know, the investments GM's made in EVs, we're creating thousands of jobs all over the country including Ohio, Michigan and Tennessee. So I'm pleased with where our strategy is.

[00:17:42] I think, you know, regardless of what happens from a regulatory perspective, we're going to be well positioned with our ICE and with our EV portfolio. We have another clip and I'll play that here in just a second that is related to GM paying attention to demand.

[00:18:01] But I want to say this first, first there was an equinox EV sitting in front of my neighbor's house the other day. I did not get to talk to whoever owned it.

[00:18:09] Although I know my neighbor, I didn't want to go up and knock on their door and say, hey, who's equinox EV? Is that I didn't want to be creepy.

[00:18:15] But it's a good looking car and GM, if it works as good as it looks, GM's got a real competitor on their hands. And I did want to say because I mentioned this, the EX-30 directly competing with the equinox.

[00:18:30] I'm not sure the EX-30 will qualify for the IRA tax credit here in the US. So the equinox may have an advantage in that regard if the tax credits stick around after the presidential election. So we'll see what happens.

[00:18:45] All right, there was another question about GM and how they're looking at the EV business and what their targets were. And it was really financial and really businessy. And I was going to put it in there, but in the end, I don't think it added any value.

[00:19:00] But I will say this, I am coming to terms, me personally, I am coming to terms with that to the fact that the transition to EVs is going to be a slower transition than what many of you have seen. Many of us would like it to be.

[00:19:14] Traditional automakers need to stay in business. They need to be profitable and part of them staying in business and being profitable involves them selling internal combustion engine vehicles and hybrid vehicles.

[00:19:25] I really wish we could make that transition faster, but the reality is that ICE cars are subsidizing the EVs for traditional automakers.

[00:19:35] And because this is the case, they can't completely switch over to EVs because that might risk their entire business and they have a fiduciary responsibility not to do that.

[00:19:50] And the unfortunate fact is that EVs, brand new EVs anyway are still pretty expensive and they are priced outside of what many people can afford. Maybe they can afford a 20 or $25,000 vehicle which still should be a nice vehicle.

[00:20:06] That's still a lot of money, but they can't afford a brand new $36,000 vehicle that would put them in a bad way financially, at least here in the US. I'm speaking US-centric here. And then we have another problem is that the charging network needs to improve.

[00:20:22] Let's just say it's getting better, but it could always be better. And until that happens we're kind of stuck. So I do think we're going to eventually transition to EVs. We just need to be a little bit more patient with it.

[00:20:43] All right, let's move on to our next clip, which is they're asking about new GM customers. Thank you. Our next question comes from Dan Ives with Wedbush. Your line is open. Yeah, thanks.

[00:21:00] So what's your impression with when you think about new GM customers looking at EVs and that trend has been high?

[00:21:07] Is that something that you expect to continue or maybe even could accelerate depending on the models and the price points when you look out the next one to two years? Absolutely, Dan.

[00:21:19] I believe when you look at the portfolio entries that we have coming, the fact that we have fresh designs, the performance and technology on these vehicles along with the range is great.

[00:21:30] So for those that are already EV intenders that might want to replace the existing EV they have, I mean, the response we're getting from dealers about the new Equinox EV is just outstanding.

[00:21:43] When they say they look at the design of the vehicle, the performance and the affordability, especially with the consumer tax credit.

[00:21:52] So I think we have an opportunity to continue to outperform where the industry is and we're going to look to build on that because we really believe in our portfolio. That's why we're spending the marketing dollars to make sure we get the awareness and our dealers are excited.

[00:22:09] So I feel like we're well positioned to continue that growth. Okay. I don't think there's anything more to add here that I haven't already said. So let's get to our final question, which is about supercruise take rates.

[00:22:23] Thank you. Our next question comes from Tom Narayan with RBC. Your line is open. Oh, yes. Thanks for taking the questions. My first one is on level two plus subscription take rates.

[00:22:36] You know, Tesla's seeing what many would describe as somewhat disappointing. I think single digit percentage take rates of its FSD product. BMW told us last week they're seeing 30% plus take rates on its five series in California and its pricing is a lot lower than Tesla's.

[00:22:55] Just curious if you've given your take rates on supercruise or if you had any commentary on what you think drives demand there. There's a saying that safety is boring. Perhaps it was all about pricing. Just love to hear any thoughts there and then I'll follow up.

[00:23:12] You know, our supercruise ramp has been slow because some of the tip availability that we have, we're now expected by year end this year to have supercruise on 22 name plates.

[00:23:25] In some cases it's on up trims for instance on the new traverse it's standard. So I don't have the specific take rates because it's part of it is it comes with the vehicle and some of it it can be something they can subscribe to.

[00:23:39] So we can follow up with you after the fact on that. Yeah, and Tom I'll just add it's just it's a little bit too early because we're coming through that trial period in significant volumes.

[00:23:50] So we should have a lot more color I would say over the next 12 to 18 months as we start to see people lapse out of their three year period and getting to that. But it's obviously something that we're watching in the commercial teams all over it.

[00:24:05] Okay, so this makes sense. You know you sell a car to somebody you give them the service free for three years. What does that look like at the end of the three years? We're not there yet. So I totally get that.

[00:24:18] This this is no different for GM than it is for Ford. Ford does some similar things with their vehicles.

[00:24:25] My question to you is not about GM or Ford in this case. My question is actually about Tesla is do you think it would be beneficial for Tesla to give away a sub, you know, give away three years of full self driving for instance?

[00:24:40] And do you think the take rate would be better because I don't know if the take rates single digits honestly Tesla hasn't really announced anything.

[00:24:47] I think that's speculation. But let's say it's low double digits. It's probably low double digits. It's probably between 10 and 15%. And that might those numbers might be high to be honest with you.

[00:25:01] But would giving three years of full self driving away with each vehicle, even if you had to bump up the price of the vehicle a little bit to be able to do that? Would that benefit the take rate at the end of the three years?

[00:25:14] I'm not sure it would. But what do you think? You can email me bodebode at 918digital.com. You can also find me on x at 918 digital.

[00:25:25] All right, everybody that is it for us this week Friday show as always will be news or as mostly most of the time will be news Friday show.

[00:25:33] And yeah, I hope everybody enjoyed this episode. I hope you all have a good rest of your week and I will talk to you on Friday. Thank you. That concludes the conference call for today. Thank you for joining. You may disconnect.