General Motors Q3 earnings rise on stronger pricing, lower incentives

General Motors posted stronger third-quarter earnings than last year and boosted its financial guidance for 2024.

Driving the news: In a note to shareholders, CEO Mary Barra attributed the year’s stronger results to “above-average pricing, well-managed inventories, and below-average incentives,” as well as a stronger market in China compared to Q2.

• General Motors reported revenues of $49 billion, a year-over-year gain of 10.5%. The increase comes despite a 2% decline in U.S. sales and a 21% decline in China sales (the company’s second-largest market). Still, sales were better in China than they were in the previous quarter by about 14%.

• Net income was relatively flat compared to 2023, declining 0.3% to $3.05 billion. However, earnings before interest and taxes (EBIT) improved sharply, rising 15.5% to $4.1 billion, reflecting an overall improvement in operating costs.

Zooming in: The automaker’s stronger results reflect improvements in key areas.

• Cost-cutting related to its self-driving unit Cruise, as well as an average transaction price of roughly $50,000 (about $1,600 higher than the industry average in September), helped boost its overall profitability. General Motors spent about $732 million on Cruise in Q3 2023, compared to just $400 million this last quarter.

• However, General Motors’ results are missing an important piece of context. Last year’s United Auto Workers strike cost the company roughly $200 million in pre-tax profit in Q3, according to commentary from CFO Paul Jacobson in 2023. Without taking this loss into account, the brand’s 2024 numbers may appear stronger than they actually are.

Looking ahead: Still, the automaker is confident it will build more momentum in the coming months.

• General Motors has now boosted its annual forecast for adjusted pre-tax profit from a range of $13 billion-$15 billion to $14 billion-$15 billion. Guidance for adjusted automotive free cash flow was also lifted, from $9.5 billion-$11.5 billion to $12.5 billion-$13.5 billion.

• Barra also told investors the company expects to achieve similar EBIT results next year, citing “progress on EV profitability,” SUV upgrades, better cost control and gradual improvements in China sales.

Bottom line: Overall, General Motors’ results reflect its strong position in the market as well as a renewed focus on trimming expenses. That said, its higher pricing and lower incentive spending compared to other automakers may prove detrimental as consumers continue to shift toward affordable models, as has been the case with brands like Stellantis.

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