Before the Bell on October 22, 2024
General Motors (GM) released its Q3 earnings report this morning, and while the headline numbers look solid, the road ahead is anything but smooth. The auto giant posted $44.1 billion in revenue, up 4% from last year, and an adjusted EPS of $2.28, beating Wall Street’s expectations. But behind those numbers lies a mix of strong growth, looming challenges, and a lowered full-year outlook that’s making investors sit up and take notice.
Trucks, SUVs Drive Revenue… But EVs Are the Future
For now, GM’s dependable trucks and SUVs, like the Chevy Silverado and GMC Sierra, are still bringing in the bulk of the revenue. These heavyweights kept GM’s engine humming, despite the backdrop of rising costs and a labor strike that’s been dragging on. But while GM is killing it in this segment, the real story is in its shift to electric vehicles (EVs).
GM is ramping up its electric lineup, delivering over 20,000 EVs this quarter—thanks in part to the popular Chevy Bolt and upcoming Cadillac Lyriq. GM has its eyes set on producing 400,000 EVs by 2025, a crucial target as the global electric vehicle market continues to explode. Industry analysts predict the EV market will hit $1.57 trillion by 2030, and GM wants a big slice of that pie. The company’s Ultium battery platform is key to that strategy, and it’s betting big that it will reduce costs and scale production fast enough to keep pace with Tesla and other competitors.
Guidance Lowered: Strikes and Supply Chain Woes Take a Toll
Despite the promising EV numbers, GM had to cut its full-year guidance. The company now expects $12-$13 billion in adjusted earnings before interest and taxes (EBIT), down from its previous target of $13.5 billion. Why the downgrade? The United Auto Workers (UAW) strike has been costly—about $200 million and counting. And if the strike stretches further into Q4, GM could be facing even bigger losses.
Then there’s the ongoing supply chain mess. The semiconductor shortage, which has been plaguing automakers for a while, is still causing delays, particularly for GM’s EV production. Supply chain hiccups combined with labor disputes are a one-two punch that could slow GM’s progress, especially as it tries to ramp up its EV game.
A Bright Spot: The Dividend Is Back
Amid all the challenges, there’s a bright spot for shareholders: GM reinstated its quarterly dividend, declaring $0.19 per share payable in November. It’s a signal of confidence from the company, suggesting that despite short-term obstacles, GM is optimistic about its long-term strategy. But that confidence will be tested as the company navigates the next few quarters.
Looking Forward: Can GM Hit the Gas on EVs?
The big question now is whether GM can hit the gas on its EV production while managing the fallout from the UAW strike and supply chain bottlenecks. With the global EV market expected to grow at a 24% CAGR over the next few years, there’s no doubt that GM needs to be at the forefront if it wants to remain competitive. The Chevrolet Bolt has been a strong player in the affordable EV segment, but GM will need to ramp up production of models like the Cadillac Lyriq to compete with Tesla’s dominance and other new entrants in the EV space.
The company’s lowered guidance reflects the challenges ahead, but if GM can smooth out its supply chain and come to terms with the UAW, it could still be in a solid position to capitalize on the booming EV market.
Bottom Line
GM’s Q3 earnings show resilience in a tough environment. The company is pulling off solid numbers in trucks and SUVs, and its EV ambitions are well underway. However, the UAW strike and supply chain issues have forced GM to revise its full-year outlook, highlighting the challenges that could impact its future growth. Still, with the return of the dividend and strong positioning in the EV market, GM is showing it’s not backing down from the fight. Investors will be watching closely to see how GM navigates these bumps in the road and whether it can keep pace with the rapid evolution of the auto industry.
