General Motors reports it lost $100 million in China during first-quarter 2024 in the face of rising competition from homegrown automakers that are quickly expanding sales of electric vehicles.
Chairman and CEO Mary Barra indicates there are no plans for the automaker to withdraw from the Chinese market, where it has operated for more than three decades, saying GM is preparing to launch several new vehicles that will bolster its position there and expects to become profitable again in China in the second quarter.
“I think we’re going to be better positioned” in Q2, Barra says, noting GM has sharpened its focus on premium segments where the competition is less intense and has built a dedicated software unit to support its business in China.
Despite the red ink in China, GM is raising its guidance for the full year after posting record revenue of more than $36 billion from its North American business. The record performance came in spite of pressure on pricing, as buyers shift away from the fullsize-truck segment and toward less-expensive crossovers such as the Chevrolet Trax (pictured, below). Trax sales were up 500% in the first quarter, while sales of GM fullsize pickups grew only 2%, the company says.
GM expects to earn between $10 billion and $11.5 billion for the full year, according to the new guidance, even though the automaker expects more pressure on pricing in the second half.
“We are off to a strong start,” Barra tells analysts. “We are doing everything we can in our power to keep the momentum.”
GM says revenue increased 7.6% during the first quarter to $43.6 billion, while its net income grew 24.6% and its margin improved 15% to 6.9%.
Free cash flow increased 61%, allowing the automaker to finance an ambitious capital-spending plan of $11 billion and an expansive share buyback, as well as set aside $160 million for employee profit sharing in the first quarter, Barra notes.
At the end of the first quarter, GM had about 63 days of unsold vehicles in inventory, slightly more than the 50- to 60-days’ supply GM would prefer.
Barra says the company will keep a tight grip on inventories. “We’re going to make sure we don’t overbuild so we can manage residuals,” she says.
While it has scaled back plans for building battery-electric vehicles, GM still expects to produce between 200,000 and 300,000 BEVs this year, according to Chief Financial Officer Paul Jacobson, who acknowledges GM’s BEV business continues losing money.
“Some of our…losses are driven by the fact we have to grow into what we’ve built,” he says.
As GM completes the expansion of its BEV plants, costs will drop, Jacobson says, adding, “Scale matters quite a bit.” Additionally, materials costs have dropped. The cost of the Cadillac Lyriq, which GM claims is now the best-selling luxury BEV in the U.S., outpacing its European rivals, has been reduced by $12,000.
Jacobson also says none of the long-term supply agreements GM has signed for critical materials such as the lithium used in batteries will penalize the automaker in the future. “We haven’t done anything that locks in higher prices,” he says.
