• General Motors says its electric vehicle manufacturing is now profitable.
For any company in any sector, the basic principle in business is to ensure that what you sell or offer as a service brings in more than it costs you to provide it. Without this, bankruptcy is inevitable.
For the automakers embarked on the electric transformation of their portfolio, this represents a major challenge. We've often heard brands complaining that they were losing money on the sale of each electric model, both for the simple manufacturing operation and for the investments made in this new technology.
Profitability would come, we were told. At General Motors (GM), the first such forecast was for 2023. The pandemic changed all that.
Yesterday, GM shared its financial results for the 2024 year, and in addition to reporting a 9 percent increase in sales, the company was proud to say that its electric model range presented a positive balance sheet in the fourth quarter of last year.
There is a nuance, however.
The company refers to “positive variable earnings”. This comes with a slight caveat. That definition, as reported by Reuters, means that revenues from electric vehicle sales were higher than fixed costs, which includes money spent on the labour required to build the models and the materials needed to assemble them.
What is not considered are the costs associated with the creation of new assembly lines, so the massive investments involved in reorganizing electric vehicle plants are excluded from the equation.
Even so, GM's announcement is an important step forward. Once the investment costs have been amortized, the vehicles will all generate profits, which is excellent news for the long term.
Also to consider is the active 2024 year GM had. The company introduced several models to the market, doubling its market share in the EV sector. The American giant offers eight models, with more expected in 2025, notably the Cadillac Vistiq and Optiq.
Of course, we'll have to keep a close eye on the performance of products already on the market, with subsidies being withdrawn in both Canada and the U.S.
