James Picariello: Thanks.
Operator: Thank you. Our next question comes from Alex Potter with Piper Sandler. You may proceed. Alex, you may need to unmute your line.
Alexander Potter: Yes. Hi. Can you hear me?
Operator: We can hear you now.
Mary Barra: Yes.
Paul Jacobson: We got you, Alex.
Alexander Potter: Okay. Very good. So first question on Ultium. You talked to the 200,000 to 300,000 production guidance, which is good to see. But at the same time, you talk about how you’re going to use consumer demand as sort of a gating factor. Would you say that the 200,000 to 300,000, is that something that you’re going to stick to sort of come hell or high water and then gauge consumer demand from there or is it something that you could slow walk maybe towards midyear toward the second half if it doesn’t seem like the consumer demand is materializing?
Mary Barra: We’re never going to build — just build products come hell or high water because the number is out there. We’re always going to be responsive to the customer. But we do believe that we’re going to be in that $200,000 to $300,000 range with the number of EVs that we have launching off of Ultium. We’re seeing strength with HUMMER as we’re ramping that up. We’re seeing strength with LYRIQ and Blazer is just now ramping up. We’ve got the Equinox coming and there’s several more. So I think when you look at the fact that these are all going to meet customers exactly with the performance and functionality that they need, we think we’re well positioned there. So I would also say though as you look across our portfolio, we are well positioned, whether it’s ICE or EV from a — with the strength of our ICE portfolio.
So we’re well positioned to respond to the customer. Like I said, we are very focused on making sure that we don’t overbuild, that we’re able to maintain our price, our margins. And we think we’ve got the strength. And specifically, if you look at Spring Hill, we can build EV or ICE in that plant. So I think we’re well positioned. We think we’re going to be in the 200,000 to 300,000 range by customer demand, and we’ll just continue to adapt.
Alexander Potter: Okay. Perfect. And then second, we talked a little bit about competition within China. I’m interested in hearing sort of your updated views on competition from the Chinese outside China. What’s, I guess, GM’s stance on this? Do you think protectionism is necessary? Are you more of a free market sort of philosophy from a company standpoint, competing against the Chinese globally particularly in places like South America? Yeah, any comments on China. Thanks.
Mary Barra: Yes. I think it’s a great question. And first of all, I think in general, we want to have our best products. And if there’s a level playing field, then it’s — we want to compete based on products. I think you have to look at where is there a level playing field, and what’s happening around the world. But there’s a lot that can happen from a regulatory or a trade perspective, but we’re focused on is making sure we have great vehicles at the right price, so what is going to help GM maintain its share around the world. When you look at South America, the Chevy brand is incredibly strong. And we’re going to continue to focus on having great designs with great product portfolio with the right features and functions, and we’re constantly working on taking cost out of the system. So it’s a — there’s value there as well. And that’s the way we’re going to compete around the world. But I think the focus has got to be on a level playing field.
Alexander Potter: Great. Thanks.
Operator: Thank you. Our next question comes from Rod Lache with Wolfe Research. Your line is open.
Bruno Dossena: Hi. This is Bruno on for Rod. Thanks for taking the question. I’d like to understand the key assumptions you’re making in your EV margin outlook for positive contribution margins this year and positive overall margins next year. Based on the hints you’ve given us, we think you need to improve contribution margins per EV by like 10,000 to 15,000 in 2025 compared to ’23. I think if I heard correctly, that’s about in line with what you’re seeing on the LYRIQ year-over-year. But if you could just help us understand the key buckets of lower cost and what’s driving that and your underlying assumptions around pricing and costs. Thanks.
Paul Jacobson: Yes. Good morning, Bruno. Thanks for the question. So if you go back to a presentation that we did back in November, we kind of highlighted the road map for 60 points of EBIT improvement in 2024 with about 60% of that driven by scale benefits. So if you think about where we are, we’ve invested a lot into the infrastructure, battery plants and manufacturing facilities, supply chain, et cetera, to ramp up production. So some of our EBIT losses are really driven by the fact that we need to grow into what we’ve built. And so that’s about 60% of that 60 points improvement. The rest is really kind of split evenly between trims and launches and also material cost reductions. So we’ve gotten off to a good start as we’ve seen battery raw materials start to come into the cell costs this year.
We’ve done a good job of reducing cell costs. And as we said, the LYRIQ is down $12,000 in cost year-over-year. So that’s the type of progress that we expect. And then as we get into 2025, scale becomes a lower driver, and we get into more of material cost reductions in the vehicles that we’re producing as they get out of their early years and we start to harness savings in each vehicle line in the second, third year of production, et cetera. So there’s a pretty good road map there. Pricing, obviously, we’re going to continue to watch and see where the market is. As we talked about, what we did on the Blazer was built into our expectations. So we’re not changing off of those targets. And we’re just a quarter in on the Ultium ramp, but the early indications are positive.
Bruno Dossena: Okay. Thank you. And then just stepping back, we wonder if there’s multiple paths to the EV losses that are currently being incurred eventually reversing. Specifically if the demand or pricing environment for these EVs is softer than expected, how much flexibility do you have to lower costs in the EV business, including as it relates to battery plans? I think your plans for 160 gigawatt hours eventually over 2 million units. Is there flexibility to rationalize that if the demand differs from your expectations? Thanks.
Paul Jacobson: Well, I think you’ve seen us take steps before. We had a delay in the Orion plant where we’ve really kind of taken advantage of some of the slowdown to put improvements into that plant that are going to help us lower the cost that came out of some of the early learnings from production at Factory ZERO and things that we can do going forward. So I think you’re going to see us be very nimble. And we’re trying to build as much flexibility as we can to navigate from here to significantly higher EV adoption going forward. But when you look at our portfolio across both an ICE, EV, it’s probably the best portfolio in our history and customers are responding to that. So we’re going to meet the customer where they are and continue to endeavor to exceed their expectations and really reward them for that loyalty that they have to us going forward.
And we think that, that can translate into the EV market as well. But as Mary said, we’re going to continue to be guided by demand for our products and our vehicles. And the early indications are that it’s going quite well.
Operator: Thank you. Our next question comes from Chris McNally with Evercore. Your line is open.
Christopher McNally: Thanks so much team. Just wanted to dive into some of the questions on seasonality following on to some of Mark’s questions prior. Paul, could you talk about the seasonality in wholesale? I think you’ve talked about full year being up sort of mid-single-digits, which would imply somewhere in the low to mid-800,000 range for the rest of the year. But if you could just help us with just a little bit of the cadence, given some of the downtime you mentioned in Q2.
Paul Jacobson: Yes. There was probably a little bit of pull forward from Q1 to Q2, particularly with the trucks as we prep for that downtime and that retooling that’s going to happen for a few weeks. But generally, seasonality, we expect to be very similar with Q1 and Q4 being slightly lower than Q2 and Q3. So nothing has dramatically changed. But around the edges, maybe a little bit of pull forward from Q2 into Q1. So as we look at the second half, I just want to caution that we’ve got to continue to be guided by the assumption that’s in there on pricing, which obviously has a bigger second half impact, given the performance that we’ve already booked in Q1 and certainly where April is looking right now. And then with the EV volume ratcheting up in the back half, that’s where we see a little bit of front half loading in the guidance that we’ve provided.
Christopher McNally: Perfect. All makes sense. And then maybe just on the actual production side, should we think of sort of truck T1 production as maybe at a tight end in Q1? Do we get back to this level in Q4, just looking at the overall yield and inventory build?
Paul Jacobson: I think that, obviously, we’re going to continue to watch demand where it is. The inventory, while we built in March, we’re still — we came out of the quarter about 63 days of inventory across the system. So some of that was intentional knowing that we were going to have this downtime. So once we get through that, I think we could see third quarter production trend a little bit higher, but we’re going to be guided by where demand sits.
Christopher McNally: Okay. Great. Thanks so much team.
Mary Barra: Thank you.
Paul Jacobson: Thank you.
Operator: Thank you. Our next question comes from Ryan Brinkman with JPMorgan. Your line is open.
Ryan Brinkman: Good morning. Thanks for all the detail on your planned upcoming BEV launches in the US. It does seem likely you will gain share there with the number and attractiveness of the offerings. I’m curious if you have a similarly aggressive EV rollout strategy planned for China, including because it seems your share in China has declined amidst the industry transition there to EVs. I heard you citing earlier the increased competitiveness of the domestic Chinese automakers as another contributing factor. And there may be still other factors. But would a blitz of new EVs be sufficient? Do you think at this stage to stabilize the share trend in China? Do you have such a blitz planned over the next one to two years? And would that be a pathway to improved financial performance or given some of the recent pricing trends represent maybe more of an investment with the payoff some years further out?
Mary Barra: Yes. I think we do have, I think, some strong NEVs coming in China this year. We’re repositioning the Buick Velite. We’ve got the Cadillac OPTIQ launch coming. You’ll see that at the Beijing Auto Show. And we also have PHEV entries in the Buick GL8 and the Equinox. And then for our ICE vehicles, we do also have like, for instance, a lead with the GL8 and there’ll be more upgrades coming there as well. So — and then on SGM, we’re also — we have a new — excuse me new NEV launches as well. So I think we’re going to be better positioned and that’s just going to continue as we move through this year into next year. And that’s why I think we can play in the NEV market both plug-in hybrids, hybrids and ICE vehicles as well as EVs. And then, as I mentioned, with the Durant Guild in the niche segment. So I think there’s a place for GM to play and grow share.
Ryan Brinkman: Okay. Great. Thanks. And with all these questions about the new vehicle operations in China, maybe just highlight some of the attractiveness if it is that you can draw from the installed base of vehicles there, the OnStar, the financing, sales service, GM Goodwrench and sort of how do you feel about that element of the China business?
Mary Barra: Well, you mentioned all of the things that come together to allow us to be successful in the market. But I would say one of the other things is last year, we also established in China dedicated software and digital business organization. And that is going to allow us to continue to improve and compete on a software basis and also on a services basis, along with what we have from a GMF perspective, financing as well as OnStar. So we’ll continue to build that.
Ryan Brinkman: Very helpful. Thank you.
Operator: Thank you. Our last question comes from the line of Tom Narayan with RBC. Your line is open.
Tom Narayan: Yes, good morning. Thanks for taking the question. Paul, just a follow-up on that comment on the EV margin. So 60% of the 60 basis point improvement is coming from scale benefits. So if BEVs were kind of closer, let’s say, to the 200,000 versus the 300,000, is that a net negative or positive to overall margins? Presumably BEVs come at lower margins, but if you’re selling a few of them, then there’s a negative impact from less scale benefit. So just trying to understand that like how do we think about that volume number impact to the company’s margins.
Paul Jacobson: Yes. Good morning, Tom. What I would say is that, obviously, based on just where we are in the journey, scale matters quite a bit when you built the infrastructure that we have. So certainly, in the short run, lower volume would have a negative effect on that trajectory. But I think what we’re looking at is kind of breakeven on the variable profit side around low 200,000. So we still are tracking to be able to get that goal. But I look at that as more of a little bit of timing of when we grow into what we’ve built. And I think from a strategic perspective, growing capacity slightly ahead of adoption to make sure that we can pace and meter ourselves on this journey. Remember, we’re playing a 10, 15-year plus game from that standpoint.
So we’ve built the flexibility in to be able to respond to ebbs and flows. And we’re at a phase right now where we’ve got to grow into that scale we’ve built. But those are all really, really sound investments. And we feel good about where that’s going to go in the short to intermediate term. And then we’re going to continue to watch that going forward.
Tom Narayan: Thanks. And a quick follow-up. On the battery raws, obviously, we’ve seen lithium down like something like 80% or since the peaks. Just curious how your contracts work. When — have we seen the best of that reduction or is there — is kind of a lag where you see the — is there more benefits to come given the lag in your battery raw mat contracts? Thanks.
