An inversion at GM

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1

What do I mean by an inversion in manufacturing of cars?

With an EV there are fewer parts. It is simpler to build an assembly line that will produce the shell of the car and the smaller set of parts.

Then simply plug in one of a few battery models.

The cost is less.

When the company reports EV sales and profitabilty it is across models. Fair to report this way.

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General Motors (GM) reported record-breaking electric vehicle (EV) sales in the second quarter of 2024, with some key takeaways including:

  • Sales

GM sold 21,930 EVs in the second quarter, a 40% increase from the same period in 2023. This included 490 electric delivery trucks for GM’s BrightDrop subsidiary.

  • First half

In the first half of 2024, GM sold 38,355 EVs, a 6% increase from the first half of 2023.

  • Ultium propulsion system

All EVs sold by GM this year use its new Ultium propulsion system.

  • Production

GM is targeting production and vehicle wholesales of between 200,000 and 250,000 all-electric vehicles in North America this year.

  • Profitability

GM expects its EVs to be profitable on a production basis once it reaches output of 200,000 units by the fourth quarter.

2

Is GM stopping production of electric vehicles?

GM CFO Paul Jacobson said Tuesday that GM would trim its targeted production of its new EVs in 2024 from between 200,000 and 300,000 to between 200,000 and 250,000. Jacobson said GM still believes it can be “variable profit positive” on its EVs at the “low 200,000” production range.Jun 11, 2024

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All of them have the Ultium electric drivetrain. The body and interiors are just added on top.

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3

It’s pretty clear that the Ultium drive train of the Hummer EV is very different to the Ultium drive train of the Equinox EV.

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4

Different capacity battery and different power motors. But a lot of it is the same. Especially things like motor controllers, software, charging circuitry, etc. It’s the new Chevy Small Block.

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5

So…they will cover the variable cost of building each car, but not recover a cent of the up front costs for development and tooling?

Steve

6

That is not clear. It depends on the depreciation schedule.

7

When I took beancounting, nearly 50 years ago, the difference between “variable”, “fixed”, and “sunk” was pretty clear. But then, by the standards in use then, Boeing went bankrupt a number of years ago, because owing more than you owned was the standard, not whether you could induce people to keep lending you more and more money, so you would not default on the money they already loaned you.

Steve

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8

You do not have the books in front of you to know that GM is not talking about fixed costs. You are assuming it is only variable costs.

Most of us have some accounting. You can not only be citing taking a course.