General Motors' EV Expansion and Software Plans for $20-25 Billion Revenue
2023-06-17
On June 15, 2023, General Motors Company presented at the Deutsche Bank Global Auto Conference, where they discussed their market outlook and strategic initiatives. The call was attended by Paul Jacobson, the EVP & CFO of General Motors Company, and Emmanuel Rosner, the lead U.S. autos and auto technology analyst at Deutsche Bank.
During the meeting, the management expressed cautious optimism about the market outlook and highlighted the stable performance of the consumer throughout the year. The company is expected to continue to perform well, and they are driving that narrative. They are implementing a cost program to reduce complexity and discretionary spend, with an expected 50% of the $2 billion cost savings to be achieved this year. The management is instilling discipline and pride in the organization to make good progress.
The key drivers of the business discussed in the meeting were the management of the balance sheet for free cash flow, the upcoming UAW negotiation, and the BEV (Battery Electric Vehicle) strategy. The company's plans for product/service expansion are focused on software and services, including subscriptions, digital retail platform, and insurance. They have set a revenue target of $20 billion to $25 billion for software.
General Motors plans to enhance the Super Cruise platform and expand it to 22 models. More details on their plans will be revealed at their Investor Day, which will include the commercial platform and features that enhance the performance and customization of the vehicle. The company is also focused on expanding its EV business globally and making the portfolio work off a platform of strength.
The competitive landscape in the electric vehicle market is becoming more competitive globally, with credible EV players rising, particularly in China and Europe. General Motors acknowledges the need to drive margins and scrub overhead costs to be competitive. However, GM has an advantage in having a head start on the platform, positioning the company to scale much faster than others.
The company's outlook for the quarter/year is cautiously optimistic. They expect to continue performing well and driving the narrative, but they are aware of the environment and are balancing what's going on around them. They have a cost savings program in place and are reducing marketing spend, complexity reductions, and other discretionary spend. The company is also aware of the discontinuation of recovery negotiation with their automaker customers on non-material inflationary costs, energy, labor, and they have built some expectations into their guidance. They are balancing the risk with their suppliers and want them to make money.
The company plans to spend about $11 billion to $13 billion in CapEx per year through 2025 for its transformation, but they have discretion in their CapEx that they could take out if needed. They prioritize the capital spend against the performance of the Company to ensure they do not invest beyond their means.
In conclusion, General Motors Company is cautiously optimistic about the market outlook and is implementing a cost program to reduce complexity and discretionary spend. They are focused on expanding their EV business globally and making the portfolio work off a platform of strength. The company's plans for product/service expansion are focused on software and services, including subscriptions, digital retail platform, and insurance. More details on their plans will be revealed at their Investor Day.