Talk of an EV price war isn't getting to the CFO of General Motors. "Our pricing strategies remain consistent. I think that's the right way to go", Paul Jacobson tells Yahoo Finance. General Motors (GM) surprised investors with a big first quarter earnings beat, as it continues to maintain market relevance in the face of production challenges and a slowing economy. As the automaker prepares for the road ahead, it's doubling down on its electric vehicle production to take on rival Tesla (TSLA).
Elon Musk's company has repeatedly cut prices since the second half of 2022, but Jacobson remains confident that these pressures won't bleed into GM's pricing model. "Our consumers have spoken with the orders that they've placed for EVs, and we're focused on meeting that demand across the board," he says.
"Longer term, we obviously have to make sure that we're maintaining competitiveness on our cost structure and making sure that we can keep our margins strong through that EV transition."
Yahoo Finance Brian Sozzi spoke with General Motors CFO Paul Jacobson. Watch the entire interview here.
Key Video Moments
00:00:05: GM earnings breakdown
00:01:00: GM CFO on EV price cuts
00:02:40: EV landscape
Video Transcript
JULIE HYMAN: General Motors is also out with earnings. The company raising its full year guidance as it bets that consumers will continue to pay top dollar for cars. Yahoo Finance Editor at Large Brian Sozzi all over these earnings. He is with us now. Really surprising quarter out from GM, I think it's safe to say.
BRIAN SOZZI: Yeah, I think GM was a little surprised. Maybe CFO Paul Jacobson didn't-- perhaps he wasn't as surprise as I would have thought. But I think the market likes this quarter. Of course, big earnings beat from a General Motors here.
Jacobson saying the economy continues to be solid and rather favorable to General Motors-- seeing solid demand was his exact quote. Also what caught my attention, and I have this on a story on the YahooFinance.com home page now, really ramping up its EV production-- looking to double the amount of EVs General Motors is producing in the second half of this year.
In the first half of this year, it sees itself producing 50,000 EVs, which is a pretty good start and, ultimately, dependent upon them increasing battery production. To that end, on EVs, big focus for General Motors-- I asked him if they have seen-- if General Motors has seen any impact of Tesla's price cuts.
PAUL JACOBSON: Well, we've seen a lot of price activity, particularly in the EVs, from all of our competitors and, really, throughout the world, but even here in the US. Our pricing strategies remain consistent. And we think that's the right way to go. Our consumers have spoken with the orders that they've placed for our EVs. And we're focused on meeting that demand across the board.
Longer term, we obviously have to make sure that we're maintaining competitiveness on our cost structure and making sure that we can keep our margins strong through that EV transition. So we're focused. We're executing well. But our pricing, we feel very, very good about where it is based on the customer response we've seen.
BRIAN SOZZI: And it has been interesting to see this quarter from General Motors, because Tesla has been out consistently-- they came out in the first quarter and cut prices. And what the market may be forgetting-- General Motors and Ford are not responding by cutting the prices of their EVs or combustion gas powered engine cars by 50%.
I mean, they're not responding in that manner to what Tesla is doing. And even Tesla is not out here cutting prices by 50%. So this issue, it is always an issue, I think, in the leadup to earnings. But again, this doesn't appear to be causing broad pricing pressure through EVs and other autos that GM is selling. And I suspect you might see the same thing when Ford reports soon.
BRAD SMITH: Well, they're not necessarily cutting prices, but they are saying that they're going to look to bring to market new vehicles that are below certain prices to, perhaps, keep them within-- keep customers within the GM family, talking about MSRPs below $30,000 and Trax models starting below $25,000, among this Buick Encore GX, and then in Vista, and Chevrolet Trax and Trailblazer as well there.
So even as we're looking at the battle among electric vehicle prices too, it's interesting to see even for some of the ICE legacy manufacturers, how they're just going to try and keep people within that family of products for the meantime, at least.
BRIAN SOZZI: Sorry, Brad, I was just waking up-- I saw a picture of the Nissan Leaf. I can't think of a more just a least exciting car than the electric Nissan Leaf. Please, don't even show--
JULIE HYMAN: I know someone who has a Leaf. I think they like it.
BRIAN SOZZI: Please, just-- don't even get me started. Please-- just, anyway, the reality-- I would also point to this-- buried inside this GM release, by 2030, GM expects to start producing 20% operating margins on their services business. Now, I asked Jacobson when I saw him about a month ago around the Auto Show and their investor day, are they going to start charging people for heated seats?
He is not ready to take it there. But I think this is a company potentially eyeing insurance, eyeing other areas in the cockpit of the car to charge people Netflix like services. And that could be a very lucrative revenue stream for GM.
JULIE HYMAN: It's funny-- I'm thinking as you're talking about the Nissan Leaf-- you're back here on set, Sozz, so I got to do this for one second. Like, does a car need to be exciting to sell? Is a Honda Civic exciting? Is a Corolla exciting?
BRIAN SOZZI: At these prices, perhaps they should be-- $30,000 for-- it's still expensive. That's $30,000 financed probably over five to seven years at 6% or 7% a pop right now in this environment. And you're suddenly now spending, what, $45,000 on a car that will completely put you to sleep in your driveway. I mean, it's awful. Nonetheless, GM--
JULIE HYMAN: The excitement to price ratio.
BRIAN SOZZI: I will say, GM is working on some very cool cars. I like that Cadillac LYRIQ. Very nice.
BRAD SMITH: All right. Yahoo Finance's own Brian Sozzi-- breaking down all things GM. We'll have more on GM later on this morning.
