GM Profits Tank in 2021. Can GM Leverage EVs to Increase Income?

February 2, 2022
2024 Silverado EV RST
2024 Silverado EV RST

GM continues to sink under the weight of the chip shortage. It’s hitting all automakers, however the latest numbers from GM reveal the extent of the impacts. Automotive News reported that General Motors’ net income is down 39% in the fourth quarter to $1.7 billion. On the bright side, GM achieved a record full-year operating profit. That’s no surprise if you’ve been on the market for a GM vehicle.

GM’s Operating Profits Are Thanks to Higher Prices

In 2021, GM’s annual net income surged 56% to $10 billion. GM’s income is up despite the fact that total vehicle sales were DOWN by 13% over 2020 to 2.2 million. The automaker met previous projections with adjusted earnings of $14.3 billion. Total revenue increased 3.7% to $127 billion.

Although total sales and quarterly profits were down, vehicles sold for much higher prices. In the fourth quarter, GM’s average transaction price was $50,149. That’s up 15% year-over-year. At YAA, we’ve been pointing out the disappearance of incentives as dealers and automakers look to squeeze every dollar out of every sale. In Q4, incentives fell 65 percent to $1,813 per vehicle, according to TrueCar.

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GM cited lower-margin cars as a contributing factor to profit declines. Could this be a side effect of the massive capital investments in electric vehicles? Probably. All those batteries and rolling computers can’t build themselves…yet. GM plans to spend $35 billion in just four years on electrification. 

As 2021 came to a close, GM had just 199,662 vehicles in stock or in transit to dealers. That’s less than half of what GM had this time last year, and one-third of inventory at the end of 2019.

Looking Ahead: 400,000 EVs in North America, More Profits

2024 Silverado EV
2024 Silverado EV RST

The automaker said it expects its 2022 adjusted earnings “to remain at or near record levels,” between $13 billion and $15 billion. 

General Motors CEO Mary Barra sees electric vehicles as essential to GM’s growth strategy. Automotive News reported that GM aims to deliver 400,000 EVs in North America through 2023. During the recent quarterly shareholder meeting, Barra reiterated the automaker’s commitment to spending $35 billion on electric vehicle development by 2025. She said that this will culminate in the launch of 30 EV models globally by the end of the same year. 

General Motors finds itself in a bit of an odd situation. Profits are down by 39%, yet they’re selling vehicles for a lot more money. If the chip shortage fades away quickly (as unlikely as that may be), would GM shoot to the top of the pack? We’ll learn a lot about GM’s path forward as Q1 progresses. 

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