Breakingviews: GM clings to its first in class status

General Motors is riding easy — for now. After years of struggling to transform into an electrified rival to Tesla, the Detroit-based automaker is defying expectations, pumping up prices and edging ahead of its old-guard peers. Problem is, while the company led by Mary Barra is well-suited to this moment, the moment might be ending.

Third-quarter results unveiled Tuesday show revenue, at nearly $49 billion, beating analysts’ expectations by 8%, while operating profit came in 22% higher, according to Visible Alpha. GM’s shares leaped over 9% and are trouncing competitors’ year-to-date.

Barra’s lieutenants have, in the past, signaled that new-vehicle prices might not hold. It seems reasonable: GM juiced billions in profit from pricing since the pandemic crushed supply back in 2020. Interest-rate hikes make car loans more expensive. Industry-wide, prices have declined for 11 months, Cox Automotive reckons.

GM’s results, however, defy the trend. While arch-rival Ford Motor remains 17% below its 2018 sales volume, GM clawed back to a 5% deficit. Its electric effort – stumbling for years as battery plants scaled up – is gaining traction. Barra expects to produce 200,000 EVs this year, which should finally cover their per-unit costs. The company’s share of the U.S. EV market rose to 9.3%, according to Cox, nearly double its mid-2023 slice.

Even autonomous taxi unit Cruise has promise. In the penalty box since a pedestrian collision last year, it nearly halved its losses to $400 million this quarter. But it’s rolled out new testing markets; Barra says unsupervised rides will resume by year-end. As Alphabet’s Waymo proves robotaxis’ viability, topping 100,000 weekly rides, that’s a tantalizing prospect. GM plans to work with Uber Technologies and is looking for a new source of funding. A solid strategic partner could help snag more customers.

Yet uncertainty keeps rising. Republican Donald Trump could win the White House, and is skeptical of EV subsidies that are providing an $800 million benefit to GM this year. Tesla boss Elon Musk is pushing low-cost robotaxi technology that, while a long-shot, could upend the industry.

Even GM remains cautious: despite predicting an up to $4 billion profitability boost from improving EV economics, it expects 2025’s results to match this year’s, implying declines elsewhere. At a mere 5 times expected earnings, its valuation pales to Tesla’s 89 times and indicates market skepticism of any upside. Barra might seem first-in-class among the aged automakers looking to catch Musk. Holding on to that lead could get a lot tougher.