General Motors' Outstanding Q4 in 3 Essential Graphs
Theodore QuinnSunday, Feb 2, 2025 6:37 am ET

General Motors (GM) reported strong Q4 results, with multiple guidance upgrades and earnings beats. The company managed to control profit-eroding incentive spending, ramp up its EV operations, and return its China operations to profitability. GM's stock price is up roughly 34% over the past year, while competitors like Ford Motor Company and Stellantis have declined. Here are three essential graphs that highlight GM's outstanding Q4 performance.

1. Incentive Spending vs. Industry Average
GM managed to reduce its incentive spending as a percentage of Average Transaction Price (ATP) by three percentage points compared to the industry average. This was achieved by controlling profit-eroding incentives and discounts. The company's ATP was solid, averaging roughly $50,000 throughout 2024, indicating strong demand for its products. GM's Q4 incentives as a percentage of ATP were three percentage points below the industry average, demonstrating effective management of incentive spending.
2. EV Operations: Variable Profit Margin Improvement
GM's EV portfolio managed to turn variable profit positive during Q4, a measure that factors in emissions credits and advanced manufacturing tax credits. This was a significant improvement of roughly 35% compared to the prior year's Q4. The company saw a roughly 35% improvement in its EV variable profit margin compared to the prior year's Q4, indicating progress towards profitability in its EV operations. GM management expects an earnings before interest and taxes (EBIT) tailwind in 2025 thanks to improved scale, fixed cost absorption, and continued focus on bringing down battery cell and vehicle costs. This should contribute to overall earnings sooner rather than later.
GM Net Profit Margin year-on-year growth value, Enterprise Value...
3. China Operations: Return to Profitability
GM returned its China operations to profitability during Q4, excluding $5 billion in restructuring charges. This was achieved through a reduction in inventory, cost reductions, and improved vehicle lineup competitiveness. The company nearly doubled its wholesales in China during Q4 compared to the third quarter, and nearly doubled revenue over the same time frame. This indicates a strong recovery in GM's China operations. GM's return to profitability in China is a significant achievement, as the country's automotive price war has sent foreign automakers scrambling to salvage market share and profitability.
In conclusion, General Motors' outstanding Q4 results were driven by effective management of incentive spending, progress in EV operations, and a strong recovery in China operations. The company's stock price increase over the past year reflects investors' confidence in GM's ability to execute and grow market share. As GM continues to make progress in these key areas, it is well-positioned to maintain its competitive edge in the automotive industry.
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