By
Steve Muchoki
October 6th, 2023
General Motors’ net profits and margins shrank over the last year with the company facing the heat of supply chain disruptions due to Covid-related lockdowns in China.
On Tuesday, April 26, automobile giant General Motors (NYSE: GM) reported its first-quarter (Q1) earnings for the year 2022. The company managed to beat Street estimates on earnings expectations. However, it reported a lower net profit and margin compared to a year ago.
General Motors Q1 2022 Performance
Besides, GM also reconfirmed its pretax adjusted earnings forecast of anywhere between $13-$15billion. However, it raised its net income expectations from $10.2 billion to $11.2 billion. But during the first quarter, the carmaker took a hit on its margins. For Q1 2022, GM’s margins’ stood at 8.3% against 9.3% a year ago.
On an unadjusted basis, the net income for GM during the first quarter was $2.9 billion. This was slightly lower than the $3 billion income a year ago. The latest earnings report from General Motors comes just a week after Tesla reported its earnings.
Investors have been closely watching the developments in the auto sector amid the ongoing issues of rising raw material costs and supply chain shortage of semiconductor chips. The industry as a whole has been suffering from this.
The recent COVID-related lockdowns in China have further added to the supply chain woes. On the other hand, the Russia-Ukraine crisis has further shot up raw material costs. But despite these problems, GM has reaffirmed to produce 25-30% more vehicles this year than over the previous year.
The Road Ahead for GM
Unlike other automakers, GM hasn’t faced any substantial impact from the war in Ukraine. However, it faces major challenges with the recent factory shutdowns happening in China. With China being one of the major markets for GM, CEO Mary Barra said that they are “cautiously optimistic” regarding their production in China.
At the same time, investors remain curious about GM’s future plans for autonomous and electric vehicles. This includes a planned $35 billion investment through 2025 in technological innovation. Earlier this year in January, GM also said that a new electric version of its Chevrolet Silverado pickup. The company reported having already received 140,000 registration for the truck. The vehicle shall arrive on the market next year.
The GM stock has been performing relatively poorly this year in 2022. The stock price is already down 37% year-to-date. On Tuesday, the GM stock plunged another 4% ending the trading at $38.04.