Welcome to the Hyperdrive daily briefing, decoding the revolution reshaping the auto world, from EVs to self-driving cars and beyond.

News Briefs

• Tesla is losing an important source of credit revenue.
• Chinese EV startup Nio plans to open a showroom in Norway.
• The IEA is warning western governments to stockpile battery metals.

GM Beats Expectations…Again

Mary Barra knows how to make money. The General Motors CEO just announced a boffo quarter that doubled Wall Street expectations in the face of a semiconductor shortage that has even mighty Apple wondering where it will find chips.

She took it a step further saying that GM could still meet its targeted $11 billion in pretax profit. A week ago, rival Ford 
painted a much darker picture, warning of a $2.5 billion hit to earnings and the loss of half its production planned for this quarter.

Sure, GM cut costs over the past several years and prepared the company for tough days. But even old, pre-bankruptcy GM was good with the ax. Credit Barra for navigating her way through this mess. The new trucks and large SUVs are selling well and, while in short supply, selling at big prices. In North America alone pricing was a $1.7 billion boon. So, too, was the GM Financial lending arm, another part of Barra’s growth plan — it added $1 billion to the quarter’s profit. The company also rebounded in China, returning to profitability and improving by $475 million over a year ago. In other words, the improvements at GM were across the board and across the globe.

GM was also some combination of smart and lucky with semiconductors. The March fire at a Renesas Electronics plant in Japan has exacerbated already tight supplies. Honda, Nissan, Toyota, Volkswagen and Ford all are on the Renesas list as top customers. GM isn’t, making it less exposed to that supplier’s woes than Ford and other competitors, according to Bloomberg Intelligence analyst Joel Levington.

Investors and analysts were surprised by the strong results and rosy forecast. They pushed up the shares by more than 4% on the day and 38% this year. Seeing Barra beat expectations is only a surprise if investors have short memories.

For several years now, she was supposed to see profits finally weaken. In early 2019, GM said profits would hold up even after VW, Daimler and BMW warned that the year would be a tough one. Barra endured a 50-day strike, still beat estimates and made $6.7 billion in income. If not for the union walkout, profits would have flirted with record levels even as the global auto industry softened.

Last year, the Covid pandemic pushed GM to its first quarterly loss since emerging from bankruptcy in 2009 – it ended up making $6.4 billion in adjusted net income last year.

This week, investors braced for the worst after Ford warned that the chip shortage would slash output. GM is saying it won’t be that bad, with first half earnings before interest expected to hit $5.5 billion. 

That brings us to a bigger point. Steady profits enable GM to maintain its capital expenditures budget of up to $10 billion this year. That means the 30 electric vehicles that Barra plans to roll out by 2025 are on track. She think it’s GM’s best chance to grow the car business.

“I think this is a growth opportunity for us, because there’s a lot of EV interest on the coasts,” she told analysts. “That’s where we don’t get what I would call our fair share. And frankly I’m going after more than our fair share.”

We know Barra can turn a profit. After decades of shrinking GM, she might just be able to finally grow the company.

Before You Go

A chip shortage with seemingly no end in sight is forcing a return to basics. Automakers desperate to keep production moving are resorting to 
leaving out a handful of more advanced features — the chip-heavy bells and whistles added to car models over the past decade. Nissan, for one, is stripping out navigation systems from some vehicles. The “intelligent” rearview mirror included in Ram pickup trucks will be unavailable for a time. And an oversized digital screen that sits behind the steering wheel of Renault’s Arkana SUV has temporarily, in a manner of speaking, gone dark. Millions of vehicle sales will be lost this year because of the shortage — instead of halting production altogether, the carmakers are saving their chips.