DETROIT (AP) — U.S. customers paid just under $49,900 on average for a new General Motors Co vehicle last quarter, helping the automaker post a 15 percent increase in net profit from a year earlier.
GM Chief Financial Officer Paul Jacobson also said he doesn’t expect the company to make deep price cuts, even as industry analysts predict rising U.S. new-vehicle inventory and wider discounts.
The Detroit automaker earned $2.92 billion from April through June on sales of $47.97 billion. Excluding one-time items, the company earned $3.06 a share, beating Wall Street expectations by 35 cents, according to data provider FactSet, and sales also beat expectations.
GM sold 903,000 vehicles to North American dealerships in the third quarter, 70,000 more than the same period in 2023, even though average selling prices were slightly lower than the same period a year ago. However, sales at its international divisions fell by 7,000 to 140,000, the company said.
Still, GM’s shares, like those of most other automakers, began to fall shortly after the open as investors recognized several potential pitfalls for the industry, including slowing sales in China.
GM is restructuring its business in China, which is dragging down its overall performance. Its joint ventures in China reported second-quarter sales of $4.7 billion, up from $4.1 billion in the first quarter, but still well below the $9.6 billion in sales the unit expects in the fourth quarter of 2023, and deliveries are falling this year.
GM Chief Executive Mary Barra said on a conference call on Tuesday that the company is taking steps to reduce inventory in China and looking at ways to better align production with demand. She said the company expects the rest of the year to be challenging and is actively working with joint venture partners to find solutions.
“It is clear that the steps we took, while important, were not enough. We had hoped to achieve profitability in China in the second quarter. Instead, we posted losses, faced significant headwinds and expect conditions to remain challenging for the remainder of the year,” Barra said. “We are working closely with our joint venture partners to restructure the business to make it more profitable and sustainable.”
GM shares, which had surged before the start of trading, fell about 7% by midday.
Edward Jones analyst Jeff Windau said elements of the company’s recent quarterly results may have added to concerns that already existed about the auto industry.
“Slowing sales in China and increased competition among local competitors could be headwinds to earnings,” Windau said in an email. “Also, the development of electric vehicles is expected to support future growth. Therefore, a production slowdown could delay sales growth targets.”
GM earlier this year predicted prices would fall 2% to 2.5% this year, but so far that hasn’t happened, GM CFO Jacobson said. Instead, the company now expects prices to fall 1% to 1.5% in the second half of the year.
GM’s prices have come down slightly, Jacobson said, because most of its sales come from lower-priced vehicles such as the Chevrolet Trax small SUV, which starts at $21,495 including shipping. The company said sales of higher-priced pickup trucks and large SUVs are doing well.
GM has been able to grow its U.S. market share while keeping discounts relatively stable while other companies have increased them, Jacobson said.
Sales and pricing were among the reasons GM slightly lowered its full-year net profit forecast to a range of $10 billion to $11.4 billion from a range of $10.1 billion to $11.5 billion.
GM also said it plans to build and sell 200,000 to 250,000 electric vehicles this year, but sold just 22,000 in the United States, its largest market, in the first half of the year.
The company plans to increase marketing spending by $400 million in the July-to-December first half of the year, in part to boost awareness of EVs, Jacobson said, though full-year spending on marketing will be lower than in 2023, he said.
GM had trouble in the second quarter Cruise Autonomous Vehicle UnitThe company said it was indefinitely postponing construction of its six-seater robot taxi, Origin, planned for Cruise.
The autonomous vehicle division will likely rely on the next generation of Chevrolet Bolt electric vehicles as it resumes operations ferrying passengers without a human safety driver.
Cruise lost its license to transport passengers autonomously in California last year after one of its robot taxis came to a halt on a dark San Francisco road, dragging a pedestrian who had just been struck by a human-driven vehicle.
GM had hoped Cruise would generate $1 billion in annual revenue by 2025, but But it was scaled down Huge investment in services.
“GM’s move to a new platform and citing regulatory concerns calls into question the timeline for adoption and potential consumer interest,” Edward Jones’ Windau said. “We believe regulators are an issue for autonomous driving and could mean it takes longer than expected for this type of vehicle to get to market.”
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AP Business Writer Michelle Chapman contributed to this report.
