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General Motors Co. said Tuesday its car prices are right where they need to be, raising questions on Wall Street about whether that might be a too-aggressive strategy amid concerns about demand and price cuts at Tesla Inc. and Ford Motor Co.
GM
GM,
earlier Tuesday reported fourth-quarter earnings that easily beat Wall Street expectations and guidance also well above forecast.
The company said it led the U.S. auto industry in sales and had the largest year-over-year increase in market share among auto makers, thanks to “strong demand for our products and improved supply chain conditions.”
In a call with analysts following the results, GM executives said they see a rise in incentives, but that’s from “record low” incentives in 2022.
GM Chief Executive Mary Barra was asked directly about price cuts in the wake of Tesla
TSLA,
and Ford
F,
moves earlier this month.
“When we look at our strong product portfolio and the interest that we have at the prices that we’ve already announced, we feel that we’re well positioned,” Barra said. “We think right now we’re priced where we need to be.”
GM saw “very strong” customer interest in its cars in January, Barra said, promising to “monitor” the price situation to make sure GM remains competitive.
Emmanuel Rosner at Deutsche Bank said that GM pricing appears “fairly resilient, which will likely raise questions of whether this is aggressive amid mounting industry price and demand pressure.”
GM’s “robust” growth in the fourth quarter “largely reflected an easy comp,” CFRA analyst Garrett Nelson said.
GM’s quarterly sales hit a multiyear low in the fourth quarter of 2021 on weak inventories caused by semiconductor shortages and supply chain issues, he said.
In a bid for market share, Tesla earlier this month slashed prices of several of its models, including its cheaper Model Y compact SUV and Model 3 sedan, in the U.S. and in several European countries by about 6% to 20%. The reduced prices also meant that some Teslas will qualify for federal tax credits.
Chief Executive Elon Musk went on say that Tesla had no demand concerns, and that January orders are “stronger than ever” and that demand for Teslas far outstrips the company’s pace of production.
Ford followed suit on Monday, saying that it was “significantly increasing” production of its Mustang Mach-E electric SUV in 2023 and lowering prices.
The Mach-E was the No. 3 EV model in the U.S. in 2022, “and the updated pricing is part of Ford’s plan to keep the SUV competitive in a rapidly changing market,” Ford said at the time.
Ford is expected to report fourth-quarter earnings on Thursday after the bell.
Analysts surveyed by FactSet expect the auto maker to report GAAP and adjusted earnings of 62 cents a share on sales of $41.4 billion. That would compare with adjusted earnings of 26 cents a share on sales of $37.7 billion in the fourth quarter of 2021.
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