American automaker General Motors (GM) saw its stock price plunge despite a surprise second-quarter earnings beat, due to disappointment over electric vehicle production not ramping up as expected.
On the 25th (local time), GM announced in its earnings report that its second-quarter net income surged 52% year-over-year to $2.6 billion. Earnings per share came in at $1.91, surpassing market expectations of $1.87.
During the same period, revenue rose 25% from the previous year, which had been impacted by semiconductor shortages, reaching $44.8 billion. This also exceeded market estimates of $42.1 billion.
The earnings growth was driven by cost reductions and higher vehicle selling prices. The average selling price of GM’s popular vehicles in the U.S. market was recorded at around $52,000, up $2,000 over the past year.
GM announced plans to reduce new product investments by the end of next year and cut an additional $1 billion in operating expenses.
Expecting strong performance to continue in the second half of the year following the second quarter, GM raised its full-year earnings guidance. The company projected annual net income between $9.3 billion and $10.7 billion for this year.
Chief Financial Officer Paul Jacobson explained, "Demand in the first half of the year was stronger than we anticipated," adding, "This allowed us to increase our pricing power."
Nevertheless, GM’s stock price fell sharply during the trading session on the New York Stock Exchange, dropping more than 5% at one point before closing down 3.51% at $37.92.
Although GM met its internal target by producing 50,000 electric vehicles in North America during the first half of the year, it fell short of market expectations, which is believed to have caused the disappointment.
GM CEO Mary Barra stated, "Supply shortages from automation equipment suppliers have limited our (battery) module assembly capacity, resulting in unexpected (electric vehicle production) delays."
More than half of the 50,000 electric vehicles produced in the first half were the older Chevrolet Bolt models, which will be discontinued by year-end. Production of new models using GM’s dedicated electric vehicle platform, the 'Ultium' battery and technology, was relatively slower.
CEO Barra added, "We plan to reduce spending by simplifying the product line," emphasizing, "We will not sacrifice margins for volume."
In a letter to shareholders, Barra said, "GM aims to produce 100,000 electric vehicles in North America in the second half of this year," and expects to assemble a cumulative 400,000 electric vehicles by mid-next year.
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