GM: EV margins will nearly match internal combustion vehicles by mid-decade

General Motors on Thursday said its electric vehicles would be “solidly profitable” by 2025, when it expects to be building 1 million of them a year in North America and 1.2 million battery cells daily in the U.S.

GM CFO Paul Jacobson told reporters ahead of the company’s investor day in New York that the automaker will maintain North American profit margins of 8 to 10 percent in the coming years and that EV margins will nearly match those of internal combustion vehicles with the benefit of additional scale and forthcoming federal tax credits.

The company is projecting low- to mid-single-digit margins on EVs in 2025, including emissions credits and software and aftersales revenue. GM expects to generate more than $50 billion in revenue from EVs and $225 billion in total revenue in 2025. Its global revenue last year was $127 billion.

“This is really just the start for us,” Jacobson said. “And when you think about the EV tax credits on top of it — we will talk about $3,500 to $5,500 per vehicle, or about 5 to 7 points of margin under the EV program, getting us to a position where we believe we’ll have ICE-like margins in the 2025 time period.”

GM has committed $35 billion toward electric and autonomous vehicle development through 2025 and aims to make its light-duty vehicle portfolio emissions-free in North America by 2035. The automaker is building four U.S. plants to produce its proprietary Ultium batteries in a joint venture with LG Energy Solution and has laid out plans to have five North American plants assembling EVs as of 2025.

“GM’s ability to grow EV sales is the payoff for many years of investment in R&D, design, engineering, manufacturing, our supply chain and a new EV customer experience that is designed to be the best in the industry,” GM CEO Mary Barra said in a statement Thursday. “Our multi-brand, multi-segment, multi-price point EV strategy gives us incredible leverage to grow revenue and market share, and we believe our Ultium platform and vertical integration will allow us to continuously improve battery performance and costs.”

Jacobson said GM’s annual capital spending through 2025 will range from $11 billion to $13 billion, a reflection of the automaker’s aggressive plans to increase EV production capacity, he said.

“We believe the EV market will be even bigger by 2025 than the 17 percent share of industry that a lot of third-party forecasters are predicting,” he told reporters. “And we’re going to do that with great design, quality, performance and more price points than anybody else can offer. And that’s really built upon the foundation of the flexibility of the Ultium program.”

GM said its U.S. battery cell capacity should top 160 gigawatt-hours by the middle of the decade. At the same time, its battery cell costs should decline from about $87 per kilowatt-hour in 2025 to less than $70 per kWh in the second half of this decade, Jacobson said.

The company projected that total revenue will increase 12 percent annually through 2025, with growth coming not only from EVs but also from software, its BrightDrop electric delivery van unit and Cruise, the self-driving vehicle company majority-owned by GM, Jacobson said.