Car Q3 Turnaround Performance Amid Semiconductor Shortage and Inflation

GM Announces 3Q Earnings...Net Profit of $3.3 Billion
Ford and Volkswagen to Announce Earnings This Week

(Photo by Reuters)

[Asia Economy Reporter Yujin Cho] General Motors (GM) delivered a turnaround performance that exceeded market expectations despite a downturn in the industry. Despite demand contraction and supply pressures caused by interest rate hikes and inflation, global automakers are expected to report solid results for the third quarter.

On the 25th (local time), GM announced its third-quarter earnings, reporting a net profit of $3.305 billion, a 36.6% increase compared to the same period last year. Earnings per share were $2.25, significantly surpassing the market consensus of $1.88 compiled by financial data provider FactSet. Revenue surged 56.4% year-over-year to $41.889 billion.

The profit increase is attributed to focusing production on high-margin large pickup trucks and sport utility vehicles (SUVs) amid the semiconductor supply shortage.

The semiconductor supply chain, which had troubled GM and the global automotive industry since last year, showed signs of improvement. Research firm Wards Intelligence estimated that GM’s vehicle production in North America in the third quarter reached 651,000 units, a 73% increase compared to the same period last year when the semiconductor shortage was at its peak.

GM’s net profit had plunged 40% year-over-year in the second quarter due to the semiconductor supply shortage.

Mary Barra, GM’s Chief Executive Officer (CEO), told U.S. economic media CNBC in an interview, "The semiconductor supply shortage is improving," but added, "It is still unstable compared to expectations, so it is too early to say we have completely overcome the supply shortage."

Following the better-than-expected strong performance, GM’s stock, listed on the U.S. Nasdaq, closed up 3.61%. GM’s stock price had plunged nearly 40% this year due to deteriorating investor sentiment amid supply issues and rising raw material costs.

Earlier on the 19th, Tesla, the first among global automakers to release earnings, announced a third-quarter net profit of $3.3 billion, a 103% increase from $1.62 billion in the same period last year.

However, Tesla’s revenue was $21.45 billion, setting a record high but falling short of market expectations of $21.96 billion. Tesla had pledged to increase annual deliveries by 50%. The company explained the earnings miss, despite quarterly revenue exceeding market expectations, as due to "bottlenecks in production and delivery and the impact of a strong dollar."

Ford, German Mercedes-Benz (on the 26th), and Volkswagen (on the 28th) are also scheduled to announce their third-quarter earnings this week. Volkswagen reported on the 14th that third-quarter deliveries increased 10% year-over-year due to easing supply chain issues. German Mercedes-Benz’s third-quarter vehicle deliveries rose 20% year-over-year, and BMW’s September deliveries increased 6.6% compared to the same period last year.

Foreign media interpreted this as a signal that automakers, which struggled due to supply chain disruptions caused by the Ukraine war in the first half of the year and factory shutdowns in China, are broadly showing signs of recovery.

FactSet projected Volkswagen’s third-quarter revenue at €70.36 billion, about a 23% increase from €56.93 billion in the same period last year. Net profit is expected to rise 21% to €3.51 billion from €2.9 billion last year.

Volkswagen is expected to reflect the loss costs (approximately €300-400 million) from its Kaluga plant southwest of Moscow, which was shut down due to the Ukraine war, in its third-quarter results. Since February 24, following the Ukraine war, Volkswagen has suspended operations at the plant due to difficulties in parts supply and is pursuing a sale.

Amid worsening consumer sentiment due to interest rate hikes and recession concerns, it remains uncertain whether the earnings improvement streak will continue into the fourth quarter. U.S. investment bank Bernstein stated in a report, "They will face risks from supply chain impacts, rising energy costs, and increased labor expenses," adding, "This will weigh on profits beyond the fourth quarter."

This content was produced with the assistance of AI translation services.