GM sets ambitious revenue target, challenges Tesla with $ 30,000 electric SUV

GM executives outlined their long-term goals ahead of a day-long event for investors and analysts at the company’s research center in suburban Detroit.

GM said it also aims to increase operating margins to 12% -14% by 2030, from 7.9% last year, by rolling out new models and services that can help boost its bottom line. . GM said it expects revenue to double to $ 280 billion, from a five-year average of around $ 140 billion.

GM shares fell less than 1%.

Stating such long-term financial goals is unusual for the automaker, and underscores its efforts to convince investors to appreciate it more as a tech-driven company than a manufacturer.

GM executives have tried to argue that it is emerging as a tech company and that it can increase its revenue and profits not only by producing cars, but also by offering recurring revenue-generating services.

Wall Street has shown enthusiasm for GM’s electrification plans over the past 18 months, often sending shares up on electric vehicle news. GM shares returned from an all-time low amid pandemic uncertainty in March 2020 to rise 14% last year. They were up 30% this year until Tuesday’s close.

On Monday, activist investor Engine No. 1, who successfully fought a proxy fight with Exxon Mobil Corp.

, publicly supported GM’s plan to transition to electric vehicles. Company founder Christopher James said he was not pushing for change at GM, but rather wanted to endorse its long-term strategy.

Still, its valuation of around $ 79 billion remains around a tenth of Tesla’s and there are plenty of challenges ahead, including uncertainty over whether buyers will switch to electricity. Plug-in cars remain more expensive than gasoline-powered vehicles, and auto executives have recognized that demand in the coming years will depend in part on government incentives.

Some consumers are still concerned about their ability to find enough places to recharge. Analysts have also raised concerns about a possible shortage of battery capacity as major automakers rush to switch to electric.

GM also says it can increase revenue by pushing into new areas of business. He recently introduced auto insurance that uses data on owner’s driving habits to reward safer drivers with lower rates. New electric van service, Brightdrop, aims to help delivery companies like FedEx Corp.

load and manage their fleets of vehicles.

“We have so many growth opportunities,” GM chief executive Mary Barra said at a press conference. “Think of the vehicle not just as an electric vehicle, but as a software platform. “

Ms. Barra said GM ultimately expects to generate between $ 20 billion and $ 25 billion in additional annual revenue from software and services, including $ 6 billion from the insurance product.

GM has highlighted an upgrade to its hands-free driving system, to be called Ultra Cruise, which it says will allow hands-free operation in 95% of driving scenarios. Scheduled for release in 2023, the technology will use a laser-based three-dimensional radar system, called lidar, and be capable of remote enhancements over time, the company said. He did not disclose the prices.

On electric vehicles, GM said it would spend $ 35 billion by the middle of the decade to introduce 30 plug-in models around the world, in a bid to increase demand for technology that now only accounts for around 2% of global vehicle sales.

GM has announced that it will showcase an electric version of the Chevrolet Silverado, its best-selling U.S. nameplate, at CES in January. The truck is expected to compete directly with its rival Ford Motor Co.

Ford’s F-150 Lightning electric pickup, which Ford says has generated more than 150,000 non-binding bookings.

GM Chairman Mark Reuss said the automaker would soon announce plans for a factory dedicated to electric trucks. He did not say whether this would involve a new site or the conversion of an existing plant.

The automaker said it plans to sell the electric SUV for around $ 30,000 for its Chevrolet brand, but did not specify the timeline. Mr Reuss said GM is also planning an even cheaper electric vehicle.

The automaker’s first electrical devices are expensive and are expected to sell in relatively low volumes, including a $ 113,000 GMC Hummer pickup that is expected to go on sale at the end of this year.

Analysts said they would like GM to say more about its nascent business units so investors can get a better idea of ​​how the company can increase profitability beyond an automaker’s relatively low margins. .

“Achieving a sustainably profitable Autos 2.0 business could strengthen GM’s credentials as a leader in the world of electric vehicles and help spur a stock appreciation,” said Emmanuel Rosner, analyst at Deutsche Bank.

GM profits have skyrocketed despite the disruption caused by the Covid-19 pandemic and the continuing shortage of computer chips, as tight inventories are pushing customers to pay top dollar for GM’s more expensive models. The company said the four quarters back to the third quarter of 2020 were the most profitable in its history, totaling $ 17.5 billion in pre-tax profit, excluding one-time items.

Write to Mike Colias at [email protected]