GM increases bet on electric cars and will add more battery factories
General Motors Co.
is increasing its investment in electric vehicles – the second surge in recent months – and digging deeper into battery production.
The company also increased its forecast for pre-tax income, excluding one-off items, for the first half of this year to between $ 8.5 billion and $ 9.5 billion, compared to its previous forecast of $ 5.5 billion . GM attributed the improved outlook to the continued strength of the US vehicle market and progress in addressing semiconductor shortages that have hampered global vehicle production this year.
GM announced on Wednesday that it will spend $ 35 billion on electric and autonomous vehicles by 2025, about 30% more than a target set last November. The increase reflects plans to add two more battery plants in the United States, joining a plant under construction in Ohio and another in Tennessee.
Chief Executive Mary Barra said GM is moving faster because the company is seeing momentum in the adoption of electric vehicles in the US and has seen a positive response to the future models shown.
GM and other car companies have steadily increased their bets on electric cars in the face of increasingly stringent emissions standards around the world. The steps, which sometimes seem like declarations of duels, have also attracted investors looking to unlock the growth potential of battery-powered vehicles.
Two weeks ago, GM rival Ford Motor Co.
said it would increase its investment in electric vehicle spending by about a third by the middle of the decade, to $ 30 billion by 2025. This amount also includes some money that has been spent in recent years. Ford also said Wednesday that it expects half of vehicle sales for its luxury brand Lincoln to be fully electric within four years.
Now Volkswagen AG
Spends about $ 40 billion on electric vehicles by mid-decade.
According to consulting firm AlixPartners LLP, automakers’ planned spending on electric vehicles rose 41% over the past year.
GM’s $ 35 billion spending target, announced on Wednesday, is 75% above the level stated in March 2020 when the company first detailed its electric vehicle investment strategy.
“The investment has reached a tipping point,” said Mark Wakefield, co-head of AlixPartners Automotive Practice.
While electric cars are easier to produce than gas-powered models, automakers are spending huge sums to increase battery production and bring other components like electric motors into their own homes.
For example, VW plans to build six battery factories in Europe alone. Ford said last month that it could take 10 battery factories around the world by the end of the decade.
The spending hike coincides with President Biden’s insistence on government investment in battery manufacturing and charging stations to support U.S. electric vehicle production. The government has called for $ 174 billion in spending on electric vehicles, including new federal tax credits for the purchase of battery-powered vehicles and commercial vehicles.
Automakers are investing money in a technology that now accounts for a fraction of global vehicle sales. According to research company IHS Markit Mark, electric vehicles accounted for around 5% of sales in the three major regions of Europe, China and the USA in 2020.
GM funds its electrical investments through profits from the sale of its gas-powered models, including large pickups and SUVs, the company’s biggest profit makers.
GM and other automakers have seen profits surge since last summer as new car demand bounced back from a pandemic-induced decline. They also benefit from record prices as US retailers’ inventories shrink due to lower production due to the lack of computer chips.
GM said earlier this month that pre-tax earnings for the first half of the year would be significantly better than previous forecasts, in part because it was able to bring forward chip shipments planned for the third quarter. On Wednesday, the company said the second half of the year will “continue to be complex and fluid.”
Additional WSJ articles on GM’s entry into electric vehicles, selected by the editor
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