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GM prioritizes faster EV launches ahead of fatter profits

General Motors Co (GM.N) on Tuesday said it will spend more than the $35 billion previously planned through 2025 to speed up launches of new electric vehicles, and noted that investments in technology will take priority over richer profits next year.

GM said it expects 2022 operating profit of $13 billion to $15 billion, in line with a record 2021 operating profit of $14.3 billion, even though vehicle production is expected to increase and pricing power should remain strong.

“What we’re doing here is essentially redeploying some of the upside earnings from the additional volume into acceleration and taking a longer-term view than just trying to maximize short-term profit,” GM Chief Financial Officer Paul Jacobson said during a conference call.

Chief Executive Officer Mary Barra said GM is “accelerating within the ’20 to ’25 timeframe from the $35 billion, but there’s also some investments that we’re pulling in” that were planned later in the decade.

Barra did not give a new figure for total EV investments through 2025. GM said in its quarterly report it expects to spend $1.5 billion more this year to speed software development and accelerate its EV portfolio.

GM’s share price has fallen from its recent highs as rival Ford Motor Co(F.N) increased investments in its own electric vehicle programs, particularly the electric Ford F-150 Lightning pickup truck. By contrast, GM has until now taken a more conservative approach, planning more EV launches and capacity for the latter years of the decade.

Now, Barra and other GM executives are turning up the volume on their argument that GM has a better long-term plan, and is ready to move faster in response to growing demand for electric vehicles.

Barra said offering more affordable electric vehicles is key to the company’s plans. GM will launch a $30,000 electric Chevrolet Equinox next year and is working on another, lower priced electric vehicle. By contrast, Tesla Inc (TSLA.O) Chief Executive Officer Elon Musk last week said the electric vehicle market leader is not working on a $25,000 electric vehicle he once promised.

GM’s 2022 profit outlook also reflects challenges from rising costs. GM said it expected $2.5 billion in additional logistics and commodities costs this year, and $1 billion less in profits from its financing unit.

For 2021, GM reported operating profit of $14.3 billion and net income of $10 billion. It expects 2022 net income of $9.4 billion to $10.8 billion, if there are “no significant new economic or supply chain challenges.”

Fourth-quarter net income was $1.67 billion and operating profit was $2.8 billion. GM’s net income margin in the quarter shrank to 5.2%, compared with its full-year net margin of 7.9%.

The automaker’s vehicle sales and market share declined in 2021, while EBIT-adjusted margins jumped as GM focused on sales of more profitable pickups and SUVs.

GM shares were volatile in after-hours trade and were last down 1.3%.

Reporting by Joe White and Ben Klayman, additional reporting by Paul Lienert; Editing by Bernard

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