General Motors reported its Q4 and full-year earnings, and the numbers are good, generally. The company lost money in China and on A/V, but it also made a ton in North America selling trucks and electric cars. That last little bit is what I’m most interested in right now.
More automakers will be reporting over the next week or so, meaning we can get a better sense of where automakers were before the new administration possibly changes everything. A big one I’m looking forward to writing about in The Morning Dump is the report from Tesla. Given that the company’s sales slid and incentives rose overall, is there any chance that Tesla will improve its revenue or margins? The company is well-known for defying gravity when it comes to Wall Street expectations so it’s a real possibility.
One thing that was entirely expected is that the Biden-era regulations designed to protect consumers from dealer fees, et cetera, would get struck down by the 5th Circuit. Will they be appealed?
And, finally, it’s the Year of the Hybrid in Malaysia, too.
Variable Profitability For EVs Is A Good Thing While It Lasts
How do I want to read GM’s Q4/2024 earnings report? Here’s the full presentation if you want to look at numbers and cool pictures of trucks. You can come up with your own headlines. If you’re in a cranky mood this morning you might point out that the company reported a Q4 loss of $2.9 billion and that, for the whole year, the company’s net income fell a whole bunch to $6 billion (after some write-downs, which I’ll get to in a minute).
If you’re feeling better this morning — if you had a good morning dump of your own — maybe you’ll see that the company had a record pre-tax profit of $14.9 billion. That’s pretty good. No one is going to get mad at that. Even better, here’s what CEO Mary Barra had to say in her investor letter:
We doubled our EV market share over the course of the year as we scaled production, and our portfolio became variable profit positive in the fourth quarter.
Neat! GM’s long been saying the company’s goal was to become “variable profit positive in 2024″ and that did finally happen in Q4. What does becoming “variable profit positive” mean in real words? Variable profit or variable margin is, simply, what you sell something for minus the cost of making it. It doesn’t cover all the initial investment costs (building a plant, design, et cetera), but it’s still an important milestone and it shows GM is doing better than any other domestic automaker that isn’t Tesla.
It’s not quite apples-to-apples, but Rivian lost about $40k for every truck it built last quarter and Lucid probably loses more. At one point, Ford was projecting that it was losing about $100,000 per EV it sold at one point, though that total number isn’t variable profit/loss (which means it probably does include investment costs) and will likely come down some when everything is accounted for at the end of the year.
GM, which is now far into the product cycle of its 2nd gen (3rd if you count EV1) electric cars, is showing that it can make a real business out of this. At the same time, this is somewhat premised on being able to sell cars at a price $7,500 below what they’re charging, because GM is the company other than Tesla that benefits most from EV tax credits that President Trump is trying to kill.
Barra also addresses this in her letter:
Of course, there is uncertainty over trade, tax, and environmental regulations and we have been proactive with Congress and the administration. In our conversations, we have stressed the importance of a strong manufacturing sector and American leadership in advanced technologies. It’s clear that we share a lot of common ground, and we appreciate the dialogue.
I guess we’ll see how far that dialogue has gotten when Republicans unveil their big bill (or, two big bills, or whatever they do).
What’s more important for GM, I think, is that the way it’s making most of its money is still going to be safe going forward. A big part of GM’s losses this year stem from China and Cruise. With Cruise getting shelved, the company will save about $1 billion next year and the company took a write-down this year to restructure its Chinese business to remove capacity.
It’s making money in the United States on trucks, SUVs, and crossovers, and a new Trump White House has said that it wants to roll back Corporate Average Fuel Economy (CAFE) requirements, which is good for a truckmaker.
With all that put together, GM expects it’ll make around $13.7-$15.7 billion in EBIT-adjusted income, even with higher labor costs and more price competition in the United States. Back in 2023, I was critical of GM for shoveling more money into dividends and buybacks at the expense of investment. I even used a photo of Rick Wagoneer to drive the point home (if I was being a real ass I’d have used a picture of Ed Whitacre, I suppose).
GM’s goal was to drive investor value and improve its share price, which it’s done over the last year. At the same time, beating Wall Street expectations has thus far resulted in a drop in stock price as investors are overall unenthused about a carmaker that’s just making cars.
Is Tesla Going To Pull Its 900th Rabbit Out Of The Hat?
There is a non-zero number of journalists, automotive or otherwise, who may always be skeptical of Tesla because its CEO is its CEO. Elon Musk is, to put it very lightly, a polarizing figure. Just check out the comments at the bottom of this post in like an hour. Making this more difficult is that, for the most part, Elon Musk’s Tesla has been wildly successful.
This lack of exuberance by some is a weird outcome given that it is, abstractly, super cool that one of the most valuable companies in the world is an American EV startup. After the company reports its Q4 and full-year earnings, it’s likely that Tesla will still be one of the most valuable companies in the world, but the market is a little mixed on what the company will report.
One analyst, Ron Jewsikow from Guggenheim Securities, thinks that it’ll be bad news. Here’s what he said, via Yahoo! Finance:
Jewsikow says he expects Tesla to fall short of Wall Street expectations on auto gross margins, excluding regulatory credits: “Tesla was quite promotional in the fourth quarter to try and hit their volume growth targets for the year, and as a result, the revenue per vehicle essentially is going to be quite a bit weaker than the Street is forecasting.”
Despite the jump in Tesla’s stock price driven by Trump’s 2024 election win, the analyst, who holds a Sell rating on Tesla, says the company likely still faces regulatory hurdles:
“We would push back that the vast majority of the bottlenecks on Tesla’s kind of pathway to robotaxis and self-driving vehicles is going to come in the form of state and local regulators that have the ability really to control what goes on the road in their jurisdictions, as well as just technological progress.”
This is somewhat where my mind is as well. The big sales in Q4 had to come at some cost and that should be reflected here. Tesla also faces a few challenges going forward, both from a potential loss of tax credits and from the lack of an affordable car.
For whatever reason, when the news seems bad at Tesla the stock price seems to curiously go up. This also happens when the news is good. Will it happen this time? It’s possible that Musk, in his call with investors, will say something that makes the market happy. More curious to me, though, is how the news of China’s Deepseek R1 artificial intelligence tool will impact the company’s value.
Musk has touted Tesla as an AI company and has reportedly tried to steer Nvidia chips from X/Twitter to Tesla. The premise has long been that the moat around the AI business is the ability to build massive data centers. What if the solution is, to some degree, Chinese firm Deepseek’s, uh, middle-out approach to optimization? Then the value of data centers and chips is, well, not as high. Or maybe it is? Blah, blah, blah Jevons Paradox.
Just kidding, he appeared (virtually) at a rally for Germany’s far-right “AfD” party and has been telling Germany not to feel too guilty about the past. This being the week of both Holocaust Remembrance Day and the 80th anniversary of the liberation of Auschwitz the timing is not ideal, and it’s already making some in Europe call for a boycott of the automaker.
The 5th Circuit Just Tossed Biden’s Dealership Rules
Well, that was fun while it lasted. The Biden-era rules that required dealers to bank junk fees and require upfront prices have been temporarily tossed by the 5th Circuit Court of Appeals in a 2-1 decision. Here’s the report from Reuters:
A U.S. appeals court on Monday threw out consumer protection rules adopted by the Biden administration to ban bait-and-switch tactics and prohibit auto dealers charging for add-on costs that do not benefit new car buyers.
In response to legal challenges brought by the National Automobile Dealers Association (NADA) and a Texas dealer group, the 5th Circuit Court of Appeals said in a 2-1 decision that the Federal Trade Commission (FTC) had violated procedural rules in writing the regulation without giving advance notice of the planned regulation.
The dissenting judge pointed out that Congress gave the FTC this power and that the rules only came about after “a decade of roundtables, comments, and over 100,000 consumer complaints, many leading to federal and state law enforcement actions against unfair and deceptive motor vehicle dealer practices.”
It’s here that I feel obligated to point out that this is the very conservative 5th Circuit Court of Appeals. You know how everyone has that one shop they go to when they need a car to pass inspection but aren’t quite sure it’s going to pass at any other licensed shop? That’s the 5th Circuit for Republicans (Democrats go to the 9th Circuit for similar reasons).
The FTC could appeal, of course.
Year Of The Hybrid In Malaysia
The Malaysian and Thai car markets are ones I think about all the time, being a huge Proton fan and all. It’s been rough there lately, though. The country’s auto sales dropped by 26%, which is a 15-year-low. At the same time, neighboring Malaysia saw big growth.
Mohd Shamsor Mohd Zain, president of the Malaysian Automotive Association (MAA), on Jan. 21 said the country’s economy remained resilient, driven mostly by private consumption and a stable socio-political environment.
“There has been robust investment in the country’s employment market, as the unemployment rate hit a decade low of 3.2%,” he said. “The overnight policy rate, which has remained at 3% since May 2023, provided a conducive environment for vehicle loans.”
Better lending is helping Malaysia while restricted lending in Thailand is clearly hurting the market. Hybrids are also helping out on the Malaysian side of the border with 30,796 hybrids sold there last year versus just 14,766 EVs.
What I’m Listening To While Writing TMD
Continuing our theme of the week, here’s Patrick Swayze explaining how great his lady is. In fact, “She’s Like The Wind.” For all the romantic sax and ’80s Piano, there’s a touch of Morrissey in this. Is that just me?
The Big Question
It’s the day before Tesla’s earnings call. The stock is at $387.86. GM is at $49.52. You’ve got $10,000 to buy stock in either of the companies and you can’t sell for a year (and no shorting). How do you split up your money?
Do you think with new management in DC that maybe we can lobby and get the 25 year import rule rescinded or maybe change it to 10 years like in Canada?
If we convince them that doing so will do more damage to the environment and make liberals very mad then I don’t see why not
We’ll say that if he doesn’t revoke it, it’ll give the liberals a win.
No.
LOL. That does not fit with isolation/exceptionalism/protectionism of the administration. If anything, imported vehicles will be made harder to get.
I know, I was trying to find something positive from this fuckery. :/
I’m no Teslastan, nor am I a detractor. They have been successful at what they are. Fine. I get that Musk has and will continue to gain enormous wealth from the company and many people like me who think he’s a creep don’t wish to enrich him. But. Too often I see the media covering Tesla like this is all Musk’s creation and genius. I’m guessing there are other people who work there, leading and innovating, who are probably even mentally stable. It might be helpful to divorce Tesla from the personality cult when we discuss it. Just like Americans are not all Trump clones. Though apparently a slim majority are…
I’ve said this for a while now, but Musk really isn’t responsible for much of anything there. The one thing he’s legitimately really good at is marketing and understanding market trends and forces. He has a keen eye for what tech adjacent stuff is going to pop off and has enriched himself beyond comprehension as a result.
Does that make him a genius? I don’t personally think so, especially considering he was enormously wealthy from birth and had access to resources 99.9% of people don’t. It’s a lot easier to hit it big when you’re starting on third base, but he is legitimately is very market savvy. I can’t stand the guy as a human being and I’d never buy one of his products but I’ll always be willing to give him that much.
But when it comes to all the legitimate technological advances Tesla has made Elon really doesn’t have anything to do with them. Maybe his presence gets good people in the door but the general consensus has always been that what he gets his hands on directly always gets worse. The Cybertruck was his pet project and, well….you can fill in the blanks.
I wish they could find a way to divorce from him because the second they do I’ll gladly consider one of their products. But that seemingly will never happen.
You’re a bit mistaken in saying he has “market savvy.” What Musk has is a knack for finding vulnerable people who have not yet been targeted. He doesn’t really know business, he just has an eye for who’s squishy. Several of his ventures failed before Peter Thiel got involved. X almost died before Thiel came along, bought it, merged it with Confinity, and it became PayPal, the entire process of which he used to teach Musk how to find vulnerable people.
Then once Thiel had taught his protege the two of them got involved in exploiting the vulnerable people in both Tesla and early Facebook. There’s a history the early founders all recount of where at Facebook Thiel goaded Zuckerberg into stabbing everyone else in the back, and another at Tesla where Musk used his funding of the launch (not development) of the Roadster in 2007 to gain even more shares that he then used to take over the company by forcing Eberhard out. They’ve both since gone on to repeat this pattern at Y Combinator, Solar City, Twitter, and Stripe.
This is useful info I wasn’t privy to, thanks for sharing/expanding on my original thought.
This needs a deeper dive. I fully believe this could and did happen. I have NEVER thought of Elon as a genius. My opinion is that he simply knows a good deal when he sees one. Your analysis isn’t far from that, but also makes more sense. The dude is manipulative, and your post supports this manipulation more than him just being good at seeing a good deal.
IMHO GM making money on EVs is good for everyone and should be celebrated. And leave it to Republicans to throw out a common sense consumer protection law that’s basically completely normal everywhere else in the first world. It would behoove the non-wealthy people who continue to vote for this party (aka most of their base) to pay attention to stuff like this but apparently that’s just too much to ask of the average American.
But the leopards won’t eat their faces, will they?
Never. The leopards will only eat the faces of (insert conservative grievance of the month).
The non-wealthy GOP supports won’t stop their support until Mercedes voluntarily identifies as male, replaces the Smart collection with an all-diesel Ram 2500 fleet with emissions defeaters, and buys at least half-a-dozen AR-15s with bump-stocks. (With apologies to Mercedes for dragging her into this!)
Lest we forget, the folks you are referring to are likely getting most of their info from faux news… Doesn’t really matter how clever or note they are if the facts they are basing decisions upon are “alternative”.
“The stock is at $387.86. GM is at $49.52. You’ve got $10,000 to buy stock in either of the companies and you can’t sell for a year (and no shorting). How do you split up your money?”
If the choice is between GM and Tesla? I’d pick Tesla any day. Tesla is still way ahead of GM.
And Tesla is a global company. And GM arguably isn’t a global company anymore ever since they sold off Opel.
But honestly, the companies I’d really want to put my money in are Rivian and Intel.
Rivian has a promising future and Intel is a turnaround story.
GM: 8
TESLA: 2
Is there something about Intel I haven’t heard? I know they are trying to turn around but can’t seem to find the solution to their overly power-hungry chips. Maybe if I ever used a company-provided laptop that achieved more than a 2.5hr battery lifespan I could see it but I’ve written them off as hopeless.
I scoffed when Apple wrote them off but damn if I don’t envy how fast those laptops are and how long those batteries last on a charge (I actually have one I bought and use a Lenovo for work for comparison).
But I admit I have not kept up with what they say they’re going to do at Intel so I’m curious if there’s potential there?
The biggest financial drag on Intel is mainly their foundry business. And it’s likely they’ll spin it off.
When it comes to their chips, Intel as been in this position before. Remember back in the early Pentium 4 days? Those were hot-running, less-than-ideal chips all in the name of max clock speeds that some idiot in marketing thought would be a good strategy. It wasn’t.
They shifted their strategy and the chip that replaced the Pentium 4 was actually an evolution of the Pentium 3.
But the biggest area of deficiency Intel has is GPUs. They are late to that game. They only recently started getting serious about GPUs with the introduction of the Arc series 2022. And it’s way better than any GPU attempts from the past.
The moral of the story is that Intel has had missteps before. Intel is also a place with a lot of talent and I’m confident they will turn things around.
But it will take time… I’m thinking it will be 3-5 years.
Intel is toast.
Not even close. Once they spin off the foundry business, just watch how their finances will change.
Didn’t they get rid of their fabs ages ago?
Nope. You’re thinking of AMD.
Get ready for more deregulation in the consumer protection zone. Guys like Trump and Musk made their money by fooling people into giving it to them; why would they want rules that protect us from they themselves?
You voted for this, America.
No one:
Entirely too many working class people: we vote for corporations to continue to be able to ram soldering irons up our ass repeatedly every single day if it means we don’t have to use they/them pronouns ever again!
objecting to the graphic sodomization imagery – ugh
Item 2 of the CARS act seems like the one item that I care about. If you can’t get that from a dealer now, you probably don’t want to deal with them (in my experience). I didn’t expect any of the experience to change with that act though. Salespeople would find new ways to do salespeople things. The profit is in the financing, extended warranties, and the Trucoat.
Look I’m just making a snarky comment here but does it really matter if GM makes money on their EVs when they at the same time have their bread-and-butter V8s (that should be flawless by now) nuking themselves at random with the “fix” being a whole new motor?
“Nobody puts BEV in the coroner!”
*meaning good for a truck-maker’s bank balance, of course — while rolling back CAFE requirements is the farthest thing from good in every other possible way.
One small bright point may be powerful small cars would be more likely if CAFE wasn’t there – the normalization around footprint has helped push the ever increasing vehicle size.
It’s important to note that the Big Question only gives a year as the minimum time to hold, and it doesn’t say what your ultimate goal should be.
I’m going to assume you want to make the most money possible in that year and sell soon after. If that’s the case, it’s 100% to Tesla no matter what you think of Elon. He currently has the ear of the most powerful man on Earth (again, doesn’t matter what you think of Trump, that statement is objectively true). The benefits that will come from that (at least short term) are impossible to pass up given the parameters I laid out.
Long term? Could be a different story.
I’m not sure I’d put money on the Mump couple lasting for a full year, and depending on how messy the breakup is things could get a bit ugly for Tesla.
That said, their stock price seems to be bad news-proof, so who knows?
GM: 8
TESLA: 1
How do I split up my money? I put it all in a mutual fund.
Sorry, that’s a no-fun answer. If I had to pick, GM. Why? Because the COMPLETE untethering of certain companies’ market cap from their actual value to society makes my eye twitch. It makes me want to (metaphorically) burn the NYSE to the ground.
Oops, that was also no-fun!
GM: 8
TESLA: 0
Thank you for your service.
Bring out yer dead!
Bring out yer dead!
I’ve got one here. EV1.
Thonk.
Bring out yer dead!
Sorry, one more. Volt. No, that’s Volt with a “V”, would you mind?
Thonk.
Bring out yer dead!
I hate to be so much trouble, but this is Bolt. No, the one with the “B”.
I’m not quite dead yet….I feel happy! I feel happy!
Sets on fire
Cheers, much obliged.
Well done!
Yesss my precious General. I don’t care what stupid shit you do, I always get overwhelmingly happy to see them succeed. My great grandpa worked with Charles Kettering in the 20’s, and went on to become head of the Hydramatic Division. I’m a huge GM stan and I don’t care who knows it. Plus I genuinely love the GM products I do own.
GM: 7
TESLA: 0
Don’t love the stock charts of either—would rather stay in cash if that were an option. But if forced to put my imaginary $10K in one, it’s GM without a second thought.
GM: 6
TESLA: 0
I’ll put all $10K into GM,
In other news, Poland wants to boycott Tesla over Muck’s comments in Germany
GM: 5
TESLA: 0
So is this week 80s actors that had a song? Waiting on Bruce Willis Respect Yourself, Don Johnson’s Heartbeat, Tracey Ullman’s “They Don’t Know”
I’m gonna throw in for Eddie Murphy’s “Party all the time” as well, thanks!
That was yesterday!
Argh, how did I miss it?!
Perhaps you didn’t miss it and merely repressed it?
Foreigner.
Oh, wait – wrong game?
I had a laugh recently when somebody attributed Fat Boy Slim’s Weapon of Choice to Christopher Walken. Celebrity is a dirty drug…
That said, I vote for Patrick Stewart covering Pulp’s Common People.
David Hasselhoff – Looking for Freedom would like a word.
So after President Musk and President Trump have their inevitable fallout will the gutted FTC finally be able to go after Elon and Tesla for stock manipulation and the other Musks for insider trading?
Haha that’s cute.
How do I split my stock? I don’t. I head over to the Shanghai stock exchange and see if I can get some money down on DeepSeek.
Their quality issues with BEV3 are going to impact their profits soon. A lot of Chevy Blazer owners having their vehicles stuck at dealerships waiting for parts for warranty issues (including mine).
GM is putting all the effort to produce cars but nothing to support the service department. OTA updates? Let dealers handle those as they want. You need a loaner? Good luck. Lets make the charging door motorized and flimsy. Can I get the manual one from the police version? Don’t even think about it.
They handled the recall issue and parts availability with the Chevy Bolt much better. After the recall the car became very reliable, but old fashioned GM way, lets kill the car.
Given Musk’s past and recent behavior, I cannot ever foresee me investing in a company he’s associated with
GM: 4
TESLA: 0
All GM stock please. GM pays dividends and has a “relatively” steady value. Tesla stock value seems to be a house of cards like the Canadian real estate market. Both keep going up despite all logic and reason.
GM: 3
TESLA: 0
201 shares of GM, please. That leaves me with enough left over to buy Elon a life.
GM: 2
TESLA: 0
The song doesn’t have a touch of Morrisey. Because a touch of Swayze is that you need…
Ultium’s internal name is BEV3, so it’s safe to say 3rd generation
$GM seems like the safer investment, $TSLA has had a runup since the election that seems even less tethered to fundamentals than their usual fluctuations.
In any case, I’m past the point of needing to risk it all for the small chance of hitting it big in a meme stock. Give me the steady performance, dividends, and record profits of GM.
GM: 1
TESLA: 0