Mary Barra, CEO of 'Detroit Three' legacy automaker GM, told analysts on her company's Q1 earnings call that the delays which have stricken the firm's purpose-built Ultium EV platform are "behind us", as the automaker hails progress in its next-gen EV ramp.
Ultium, GM's first purpose-built cell architecture and EV platform, has been beset by problems including weight issues with the Ultium battery pack casing and supplier delays.
"We are seeing good progress with our Ultium EVs because they are purpose built and customers do not have to make a trade-off, and we also see the charging infrastructure get better every quarter, so I feel very good about where we are," Barra says.
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The automaker has increased battery module production by 300pc over the last year six months and is projecting to double its current Ultium cell capacity "by the end of the summer", according to Barra.
The company's second cell plant in Tennessee is also expected to reach full capacity by the end of the year, which CFO Paul Jacobson says will continue to drive the downward movement in GM's battery production costs that it has seen over the last year.
"We wholesaled over 22,000 Ultium-based EVs in Q1, up from only 2,000 last year, and remain on track to achieve our 200,000-300,000 unit production and wholesale volume target for 2024," the finance chief states.
Jacobson also says that "the early indications are strong" that GM can achieve this unit volume target without succumbing to pressure to lower prices. This comes as US EV market leader Tesla made its latest round of price cuts in response to slowing demand.
GM's latest steps towards Ultium-based EVs is reflected in the fact that the Bolt, the firm's former flagship BEV and its only all-electric product not on the Ultium platform saw a 60pc decrease in Q1 retail deliveries, while GM's overall EV retail deliveries rose by 21pc, according to Jacobson.
Reaping the benefit
A recurring theme from GM management is that the OEM is on the cusp of reaping the benefits of investments into scale that made over the last several years, and which have depressed the balance sheet of its EV division for some time.
While GM reissued its EV production guidance of 200,000-300,000 by the end of 2024, Jacobson provided some colour on how this target relates to EV profitability.
The CFO revealed on the call that GM is aiming for variable profit breakeven "by the low 200,000s", saying that 60pc of the firm's expected improvement of EV operating margin to breakeven is "driven by scale benefits".
"Our Ebit losses are really driven by the fact that we need to grow into what we have built," Jacobson says. "When we get into 2025, scale becomes less of a driver and we get more into material costs of the vehicles we build."
And the CFO says that the automaker has already begun to see material reductions in battery material costs to capitalise on the economies of scale it is finally realising with Ultium. "Since last year, we have significantly reduced cell costs, with a large driver being lower battery raw material costs, especially for lithium," he adds.
Jacobson also cites the example of the Cadillac Lyriq, which has seen a $12,000 year-on-year production cost reduction, which he says GM is using as a model for how it will realise its margin goals on its EV line-up.
However, GM's anticipated production scale-ups will have to be impressive indeed in order to reach even the lower end of its 2024 volume guidance, given that the OEM sold just over 16,000 EVs in its main US market in Q1.
The new compact Equinox EV SUV —which "will arrive in showrooms this quarter", says Barra — and more affordable version of other GM BEVs will have some serious lifting to do. Barra is banking, initially, on Equinox being the most affordable long-range EV in the market.
"We will then introduce a more affordable trim series for the Equinox EV, the Blazer EV, and the Silverado EV in the second half of the year, which will help grow volume and share," she continues.
Ciaran has written about finance, politics and culture. He is passionate about e-mobility and what it means for our way of life.
Ciaran has a Masters in Ancient Philosophy from Oxford University.
