GM Delays EV Projects in Latest Industry Pullback

For years, automakers raced to invest in new battery plants and factory upgrades to introduce new electric models, encouraged by early consumer enthusiasm. Lately they have been reversing course just as quickly, adjusting to buyers who have proved more hesitant to switch to EVs than expected. 

Last week, Ford Motor said it would expand an existing factory in Ontario, Canada, to make combustion-engine pickup trucks, after moving away from plans to build an electric SUV at the facility. 

U.S. electric vehicles continue to grow, but the pace has eased and demand has not matched many forecasts. EVs made up about 8% of new vehicles in the second quarter, up from 7.2% a year earlier, according to Kelley Blue Book.

Meanwhile, stout demand for gas-powered vehicles continues to fuel profits for GM and other automakers.

GM on Tuesday raised its adjusted profit outlook for 2024, saying prices and sales in the U.S. remained steady even as consumers grappled with more-expensive financing.

Net income for the U.S.’s largest automaker by sales rose 14% in the second quarter compared with a year earlier, to $2.9 billion. GM’s pretax adjusted earnings of $3.06 a share zoomed past analysts’ estimates of $2.70, according to FactSet.

GM shares fell despite the brighter profit outlook, falling about 6% Tuesday.

Even the rosier full-year projections GM offered Tuesday imply a significant “downshift” in performance in the latter half of the year that likely soured some investors, RBC Capital Markets analyst Tom Narayan wrote in a note to clients Tuesday.

The automaker anticipates lower prices, higher commodity costs and more marketing spending in the latter half of the year, GM chief financial officer Paul Jacobson said on a Tuesday call with analysts.

The uptick in quarterly income was driven by GM’s core truck-and-SUV business in North America, its biggest source of profit. That is underwriting the automaker’s investments in electric vehicles and robotaxis. 

“Where the cash flow is really coming from is the [combustion-engine] portfolio,” Jacobson said during a media briefing. “The underlying performance of the business is really quite strong.”

Strength in the automaker’s home market offset further erosion in China, where GM lost money for the second straight quarter amid stiff competition from homegrown Chinese brands.

GM is working to restructure its China business after efforts to cut costs and inventories haven’t changed the picture, Jacobson said during a media briefing.

“It’s clear that the steps that we’ve taken, while significant, have not been enough,” he said.

The company remains optimistic about its nascent electric-vehicle business, and said most of its latest EV customers are new to GM’s brands. It announced a plan to delay the opening of an EV truck factory in Michigan for the second time, to mid-2026, and to defer the first EV for its Buick brand, which had been planned for 2024.

“As excited as we are about our portfolio, we are committed to growing responsibly and profitably in any demand environment,” Barra told analysts Tuesday.

It is the second time this year that GM has boosted its full-year profit forecast. The automaker now expects pretax adjusted income of $13 billion to $15 billion, up from a previous forecast of $12.5 billion to $14.5 billion.

Electric-vehicle leader Tesla is scheduled to report quarterly results later Tuesday. Ford Motor is set to report earnings Wednesday, and Jeep-Chrysler parent Stellantis earnings are expected Thursday.

GM’s bullish outlook comes as the U.S. auto market continues a yearslong slog back to inventory levels that are more in line with historical norms. Pandemic-era supply chain problems led to vehicle shortages that created a seller’s market, leading Americans to pay record-high sums for new cars.

Now, car loans are more expensive, dealer lots are better stocked, and automakers are more reliant on discounts to keep sales up, according to Cox Automotive. The industry had a 73-day supply of vehicles in June, up from about 40 days in the fall of 2021.

Still, the amount of money Americans are spending on new vehicles has remained higher than many analysts expected. The average new-car price has hovered around $48,000 for more than a year, compared with less than $40,000 before the pandemic, according to Kelley Blue Book.

Going into 2024, GM had planned for a 2% to 2.5% decline in the average price paid for its vehicles, but that hasn’t materialized, Jacobson said. He now expects a drop of 1% to 1.5% in the second half of the year. 

While GM raised its projection for operating income and free cash flow as adjusted for certain items, the automaker left its projected net income virtually unchanged.

GM booked a nearly $600 million charge in part for abandoning the Origin, a robotaxi that had been developed by the automaker’s Cruise autonomous driving subsidiary. Instead, Cruise will use GM’s Chevrolet Bolt, which the automaker plans to relaunch next year, for its self-driving taxis.

Write to Christopher Otts at christopher.otts@wsj.com

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