The US-based automotive giant General Motors (GM) posted a third-quarter (Q3) earnings report on Wednesday. It reported lower revenue and net income than last year’s same quarter period. The company brought in USD 26.8 Billion in revenue, a plunge of 25% since Q1 2020 due to limited car production and the global chip shortage crisis. Its net income tanked 40% year-over-year (YoY) to USD 2.4 Billion.
The quarter was challenging due to continuing semiconductor pressures. But it also includes very strong results,” said GM’s CEO Mary Barra in a letter to investors. “We now believe GM’s full-year results will approach the high end of our guidance.” According to Cox Automotive, the cumulative sales in the US were down 13% in the quarter ending on September 31, 2021. The company’s adjusted EBIDTA also tanked by 4% since Q1 2020.
GM expects its full-year income to lie between USD 8.1 Billion and USD 9.6 Billion, while its adjusted EBIDTA is estimated to be between USD 11.5 Billion and USD 13.5 Billion. In a letter to its shareholders, the company said that it is striving to double its revenue by 2030 and plans to expand its adjusted EBIDTA margin by 12-14%. It also mentioned that the company has evolved from just being an automaker to a platform provider with rapid growth in the EV business segment and other business offerings such as BrightDrop, OnStar Insurance, GM Defense, and Cruise.
A major key factor that helped the company to generate a significant amount of earnings is its settlement with LG Chem. GM took USD 1.9 Billion in reimbursement fees over recall of its electric cars that were at risk of fire. The battery debacle resulted in the recall of thousands of Chevrolet Bolt. This settlement helped the company’s balance sheet to gain USD 700 Million in this quarter. Major manufacturers are jumping on the bandwagon of the EV trend owing to rising environmental concerns and depleting fossil fuels.
Latest Developments
On the futuristic growth, the company said, “We envision that connected vehicles and other new businesses will drive more than $80 billion in new, incremental revenue. At the same time, revenue from EVs is expected to grow from about $10 billion in 2023 to $90 billion.” It added it’s adding a “Digital Business Team to establish digital market leadership.”
In a quarterly earnings report, GM said it’s developing BrightDrop EV600 electric commercial vehicle for its client FedEx Express. It also announced that it has arranged the grand opening of Factory ZERO in Detroit-Hamtramck, next month. The factory will manufacture the Chevrolet Silverado EV, GMC Hummer EV, and the Cruise Origin. The company also mentioned that it has started with the Bolt EV replacements.
Competitors Earnings
The chip shortage undoubtedly hampered the growth of the automotive industry. Ford beat Wall Street expectations with a revenue of USD 33.21 Billion; however, it reported lower revenue than Q3 2020. The company generated USD 1.8 Billion in net income in Q3 202. Following its quarterly results announcement, its share spiked nearly 9% after in-hours trading. Ford CEO Jim Farley said in an interview that “you’re already seeing favorable change in the slope of our earnings and cash flow. There’s more to come.”
The frontrunner in the EV industry, Tesla also reported Q3 earnings results last week. The company generated USD 13.76 Billion and USD 1.62 Billion GAAP in revenue and net income respectively. It delivered a gross margin of 30.5% on its automotive business segment. The quarterly earnings report mentioned that it’s “shifting to Lithium Iron Phosphate (LFP) battery chemistry globally.”
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