If you look at the numbers, the good times have never been so good for General Motors. (Managing director) .
Shares of the country's largest automaker by sales are up 31% so far this year and shares are up nearly 45% from a year ago.
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In July, the Detroit automaker beat Wall Street's earnings expectations for the second quarter and raised its full-year guidance.
Executive Director Mary Barra opened the quarterly report earnings call thanking “the GM team, as well as our dealers, suppliers and other business partners, for helping us deliver strong results in the second quarter and first half, including record revenue in both periods.”
During the call, Barra told analysts that U.S. EV deliveries grew 40% year-over-year in the second quarter, while the industry grew 11%.
However, GM shares fell 6.4% after the results, with analysts expressing concerns about electric vehicle losses, GM's business in China and earnings in the second half of the year.
Barra discussed GM's announced goal of becoming an all-electric vehicle by 2035 in the Sept. 22 issue of Sunday morning on CBS.
“For our light vehicles, yes,” he said. “We will be consumer-led, but the plans we have in place will get us there.”
But with EV sales slowing, Barra said, “I don't think we ever thought it was going to be linear.”
GM shared sales data on electric vehicles with CNBC on September 23, which showed a notable increase for GM until August.
The automaker sold nearly 21,000 electric vehicles in the U.S. in July and August, nearly matching its total EV sales for the second quarter. GM's EV sales through August were up about 70% compared with a year earlier.
GM puts Cruise back on track
“We are definitely outpacing the industry in terms of growth, in terms of electric vehicles,” Rory Harvey, GM’s president of global markets, including North America, told CNBC. “We have the most complete electric vehicle lineup of any manufacturer in the industry, in the U.S., right now.”
Traditional automakers still fight for a distant second place behind Tesla (TSLA) which, according to Motor Intelligence, sold more than 164,000 electric vehicles during the second quarter, roughly double the sales of GM, Hyundai/Kia and Ford. (F) combined during that time.
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GM's self-driving ride-hailing company Cruise, meanwhile, plans to restart autonomous testing in California soon after losing its license to operate driverless vehicles last year following an accident involving one of its robotaxis.
GM will now use its next-generation Bolt electric vehicles for its Cruise robotaxi business instead of the Origin vehicle as it had planned.
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“Starting today, we will be deploying multiple manual mapping vehicles in Sunnyvale and Mountain View with the intent to advance to supervised testing with up to 5 (autonomous vehicles) later this fall,” the company said in a statement. x.com/Cruise/status/1836812363963486286″>Posted on September 19th in x.
“Resuming testing in the Bay Area is an important step in continuing to work closely with California regulators and local stakeholders,” Cruise said. “This will allow our local employees to directly interact with our product while refining and improving our technology through R&D.”
Analysts have focused their attention on GM's Investor Day, which is scheduled for October 8.
Bernstein downgraded GM from “outperform” to “market perform” with a $53 price target.
Shares have gained 85% since last November, but Bernstein data now indicates mounting earnings headwinds, the firm said.
Bernstein analysts cite the risk that GM will announce additional capital requirements during the October event.
Bernstein therefore wants to “wait and see” what happens with the stock.
Analyst expects GM to tackle electric vehicle adoption
The investment firm said continued inventory buildup in the U.S. will lead to price headwinds next year, a delay in the introduction of electric vehicles as Cruise extends losses into next year. In addition, headwinds in GM’s international business are increasing.
Analysts at Bank of America Securities maintained a buy rating and $85 price target, which the investment firm said “are based on our view that it remains an industry leader in its transition from core to future.”
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“We expect GM to discuss its product portfolio, provide an update on its EV strategy and long-term EV goals, review its plan for Cruise, its approach to growing revenue from software and capital allocation, among other topics,” B of A said in a Sept. 20 research note.
The firm said the event will likely provide insight into GM's efforts to balance the slowdown in EV adoption with its Future business plan, “which we still expect to focus on electrification, but with a greater emphasis on hybrid technology.”
“Consistent with previous investor days, GM will likely discuss its product portfolio and may offer a preview of some upcoming vehicle launches,” B of A said. “In that regard, GM has talked about offering 'bolder and more distinctive new designs with advanced technology' to help drive market share growth and improve profitability.”
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B of A said GM's Cruise unit lost momentum in 2023, but the company remains committed to getting Cruise back on the road with plans to operate in Phoenix, Dallas and Houston.
“Ultimately, we expect GM to take a measured approach to its expansion and it will likely be a few years before Cruise generates significant revenue from the business,” the firm said.
During the conference call, Barra acknowledged that the Chinese market “has significant overcapacity and many startups and established competitors continue to prioritize production over profitability.”
“We have been taking steps to reduce our inventory, align our production with demand, protect our prices and reduce fixed costs,” he said. “But it is clear that the steps we have taken, while significant, have not been sufficient. We had hoped to return to profitability in China in the second quarter.”
“However, we reported a loss and expect the rest of the year to remain challenging as headwinds are not easy,” he said.
B of A reiterated that GM should exit the Chinese market, just as it left Europe in 2017.