General Motors Company (GM) Earnings Call Transcript & Summary

Hello, everyone, and welcome. I guess this is the last time slot of the SDC for 2023. So thank you for your support of our conference. And I commend you for your staying power, joining in the last session. We're thrilled to have Mary Barra, CEO of Ford -- of General Motors, here today. Okay. I've just lost all credibility. Mary is not coming back.

It's Friday. It's Friday.

Clearly. And everyone was listening, which is a good thing. So...

Yes, that was just really a test.

So Mary and I were just remarking that GM hasn't been at the SDC for at least 15 years, if ever. So we're really thrilled to have Mary here to tell the GM story. So thank you for being here.

So maybe we could just start, really zoom out and think about and talk about the global auto market. How do you think about it over the next 10 years? Is it structurally growing? Is there growth outside of China? And if you were to say 10 years from now, are we going to be selling more or less units than we are today?

I think if you say outside of China, I mean, there's still tremendous growth opportunity in China. I think when you look at U.S., North America, we're still a little depressed from where we were prepandemic, but I don't think there's tremendous growth left from a number of vehicles sold in the U.S., I think probably similar in Europe, maybe a little bit more growth opportunity in some of the developing markets, South America, et cetera. But -- so what I look at, though, in the shorter term, we have the opportunity to grow, especially in the United States with EVs because we're underrepresented in the coast, and that's where the EV penetration is highest. We're seeing it come true with our order -- with where we sell Bolts with our orders for Silverados, HUMMERs, LYRIQs, et cetera. So that's a more immediate growth opportunity. But I think when you look at -- out 5 to 10 years, where the real growth is going to come and where I'm really excited about, it's going to be not only in some of the new businesses we're in like BrightDrop because we really weren't in that segment before. So that's a total growth segment for us. And we're seeing already that pickup as well as our overall fleet sales. Also, when you look at the GM energy business because a lot of our commercial customers, they want total solutions as they make this transformation with us. But then the giant growth opportunities for us are autonomous. When you look at where our EV -- our AVs are today, we're now running 24/7, 7x7 in San Francisco. We continue to expand in Austin, in Phoenix. We just announced we're going to Houston and to Dallas. And I think a number to think about from a Cruise perspective is it took them -- once they started doing driverless miles, true driverless miles, so no one's behind the steering wheel. It was 15 months to get their first 1 million miles. Three months later, we're at 2 million. So that's how fast they're scaling. And I think that, that is a huge opportunity, and we're only at the very, very beginning of what that technology will be. I think the other big area of opportunity is the vehicle is a platform and the software and services piece of that allows for a very different margin structure, allows for a longer relationship with the customer for the life of the vehicle because most people -- when you think about it, the average age of a vehicle in the United States is now over 12 years. And so you want that first, second, third customer and that connectivity, you can get it. And that's why we've made some decisions, we want to own the relationship with the customer. And so that's why we're investing, Mike Abbott from Apple just joined our team to make sure we have the right in-car experience that is seamless and really takes it to the next level of what people have today.

And I'd love to -- and we will get into some of those incremental opportunities going forward. So thank you for that. If we reflect on the last 12 months, what are the 2 or 3 things that you think have happened in the auto industry that are most notable or maybe has changed your thinking in any way?

I first took this job back in 2014, I said we were going to see more change in the next 5 years than we've seen in the last 50. I think we're seeing more change in every year than we've seen. It's just so much is changing. But I think what's notable, one, is people went in the '18 time frame of autonomous was going to be here next Tuesday and then they are like, oh, it's never going to be here. It's here. So I think that's one thing. And the scaling I just talked about that Cruise is doing is proving that. I think the second is the IRA and the opportunities that, that affords, and I'm really pleased that General Motors is well positioned because well before we even knew there'd be an IRA, we started with an onshore ally-shore of our supply chain. And so we're going to be able to take advantage of that. We have one battery plant that's scaling really well. Second one comes on this year, one next year, one the following year. So I think getting the supply chain right is something that is pretty significant. I think there is a lot of start-ups in the industry, but I think people are realizing the scaling and the manufacturing of autos is a skill. And so I think we can take advantage of the manufacturing expertise, the men and women that work at General Motors that know how to safely build high-quality vehicles efficiently. So I mean, I think there's been a lot of change in this last year, and I think we're just going to continue to see it.

So on your latter point, you mentioned a number of start-ups, and there are 6 new EV makers with a market cap above 7 billion plus BYD. So you have 7 new competitors and arguably an industry that historically has been super, super competitive. What happens? Like, is there consolidation that's going to happen? And generally, more competition makes tough industry even tougher, right? So I'd love to get your perspectives on those questions.

Yes. Well, first of all, I don't discount any competitor. I think you do that at your own risk. And so I take every competitor seriously. I think though scale matters in our business. And I think the investment -- one of the things where we have a huge advantage is we don't have to go find a plot of land, permit a plant, build a plant. We just modify an existing plant. And so we're leveraging that. So I think a lot of the start-ups are starting to seed the capital that they need to truly scale their business. It's a different world than it was a couple of years ago on the ability -- when you look at some of them, how optimistic the market cap grew to where they are now and the funding that they're trying to get that they know they need. So I think there is going to be some consolidation. I mean I think when you look at China, over 100 EV makers, 50% capacity utilization, that's not sustainable. But I think no one has a right to exist in this business. We have to earn our way, and we're very fortunate that we have a really strong internal combustion engine business that is funding our future, and we can leverage all the assets, leverage our strong brands, our customer loyalty, the industry-leading quality that we have. But I think it's a very competitive environment. And you just have to move fast and be efficient with capital, have the ability -- we have the ability to generate the free cash flow to continue to move in the right direction.

So if ultimately, there are maybe fewer players going forward, 5 and 10 years from now, than there are today, what happens to them?

I think there's a variety of things. I mean some -- they might partner, they might get acquired. I think there's a couple right now that are on the brink that just might not exist. And then generally, someone goes in and buys the asset. So I think it's going to be -- I don't think there's one answer to it. It depends on the size of the existing company. I think there'll be more partnerships, hopefully, more technology sharing. I think we're an industry that hasn't been as efficient as we could in sharing the technology that, frankly, is not a customer differentiator.

And do you think that opportunity -- that consolidation is an opportunity for GM?

Absolutely. Absolutely. And we constantly look at that, where are the opportunities. We have a strong partnership with Honda already. There's many opportunities, many conversations going on. So we're keeping our eyes wide open on those opportunities because it's all about how do we get more efficient with our capital that enables us to have the right product portfolio and the right products to win in the market.

Right. And if we -- again, this is Strategic Decisions Conference, so I know I'm asking a lot of questions about 5 to 10 years out. But if we do think 5 and 10 years out, relative to the last decade, will the industry have higher or lower profits and why?

I think those that are best positioned will have higher, and I think it's for a number of reasons. We are in the first lap of a long race on where battery technology is going to be for EVs, and that's why it's so important. And one of the distinguishers of General Motors is we, in addition to the partnerships we have with Samsung, with LG, with CATL in China, we also do our own research, work with a lot of start-ups. A lot of start-ups come to us with promising battery technology, but they don't know how to make it automotive grade and to scale it. We know how to do that. So we have a lab that they can -- we can work with them on that. So I think battery technology will -- that will be a differentiator. I think that -- and how we get there, I think over time though, the industry will catch up. We've seen that. But I think the opportunity to make more money comes in, especially, again, for General Motors, with our Cruise partnership. We're the only full-line portfolio manufacturer that has the autonomous capability in-house. And we continue to work and look for opportunities to leverage what we're doing at Cruise. And it's really beneficial for them because right now, we're testing the Origin on streets in Austin, and we can scale up and build the Origin to help their scaling which again, once you ride in an Origin, I've had the opportunity to do that a couple of times now, and it's a game changer. As Kyle said, a few years from now, we're going to look and say, why did we think when 4 people were riding somewhere, we were going to be comfortable with the 2 people in the back seat staring at the people in the front seat, back of their heads. I mean it's a campfire seating. We're having a conversation. The vehicle is really well designed. So I think when you look at the growth there, not only in rideshare, but personal autonomous vehicles in moving of goods, I think autonomy is a huge opportunity that will have a different margin profile. And then from a software subscription services on demand, we already know that's a better margin business with the business we have with OnStar.

Right. I mean, for me, I guess, the question is, can you point to other examples of really competitive industries that have been able to effectively move and change their margin profile dramatically over time? Because that's effectively the starting point for the auto industry, arguably one of the most competitive global industries. And at least in my eyes, it feels like it's becoming more competitive. You have the new EV upstarts, you have the Chinese who are becoming players on a much more global, not only there are hundreds of them, but they're becoming much more global in their aspirations. And so you have an industry that was always really tough, and it's defining characteristic from a 4 to 5 forces perspective was just the intensity of rivalry, right? And that rivalry feels like it's getting more pronounced, right? And I hear the notion of value-added services. I hear the notion of autonomy. But there's been a lot of technology innovation in the automotive industry in the last 50 years and the people that have wanted them are consumers, right? Because the consumers are getting 10 airbags per car when they used to charge $1,000 an airbag. The consumers are getting backup cameras standard on every car. The consumers are getting Level 1 autonomy now for free. The consumers are getting blind spot detectors for free. And despite that innovation, operating margins for the industry have been pretty consistent for the last 30 years. So how do we have confidence that this time is different? And when you think analogously, the other examples or industries that have migrated kind of from the starting point, what do you think of it? Like, what's the best analogy for that?

One I think of is...

Sorry, that was a really long-winded question.

Yes. No, that's okay. I think it's phones. I mean, remember, I'm old enough to have had a flip phone or the phone where you're sitting there and using your numerical characters to send messages.

I had a brick phone. So I think we're about the same age. So...

I had that too, but I didn't want to go back that far. But think about a smartphone now. So you go from -- it's a device mainly to enable you to have voice communications but portable. Awkward to send messages to something that you can frankly manage your life on. I think the vehicle, and I think it's why a lot of the tech companies are so interested in the automobile because I think it is that software platform. So I think when you look at a flip phone or a brick phone all the way to the phone -- smartphones, I think that's an example. And there's not -- I think there's an opportunity of doing it well that you can carve out a place for yourself because I think there's really only a couple of major phones -- companies, smartphones that are really succeeding. So I think that's an example of the opportunity. It's very parallel because of the vehicle can become that platform, and you can pull the information from the vehicle to provide new experiences for the customer, make their life better that they haven't had before. And not -- I don't think everyone can do that because it's not -- it doesn't happen overnight. There's an investment to be made. That's why we made the decision we made with CarPlay because we want to own the relationship with the customer. And also our customers are already telling us what there's enough in the vehicle already that they want it to be more seamless, and we can do that.

All right. But if -- and I want to talk about Cruise and the revenue opportunity as well as the differentiation opportunity there. But outside of Cruise, and you did basically say, hey, we're not really sure we need to reinvent the world on media, and we'll go with Android and whatnot or not go with Android. But when you think about like what -- if we take out commercial, what do you think consumers will ultimately value and pay for that will be sustainable? Because clearly, consumers have always paid for advanced features initially. And then they've almost become table stakes, right? So I get it on the commercial side. I think it's pretty clear what additional value-added services can be. But on the consumer side, beyond autonomy, what are the kinds of opportunities that you see that could be meaningful from a revenue enhancement perspective?

I mean I think we're already seeing the differentiation between segments. And what we see happening with full-size trucks and SUVs, I mean, we continue to have more upscale models. When you think about it, just a few years ago, someone would say -- they didn't say, I drive a GMC Yukon. They said, I drive a Denali. And now we have the Denali Ultimate. And frankly, the penetration of people who want the Denali Ultimate, not the Denali, it was surpassed what we thought it was going to be from a penetration perspective. We're seeing it with the Silverado with High Country. We're seeing it with the Escalade Platinum in the V-Series. So there is and I think this is a niche that there tends to be a moat around because when you look at -- we've sold millions of Silverados, and our loyalty in Silverados is about 70%. And so I think in certain segments, there's higher loyalty. I think we've seen the pricing power of that. And yes, you've cut that. But I think there's not an industry or not a product where you can just stay stable. Of course, you've got to keep innovating with new technology, new offerings. But I think that's rich in General Motors' history and frankly, we're proving it right now. But I guess I would say -- you said excluding autonomy. I think autonomy opens it right up because think about personal autonomous vehicles. I mean that's a game changer from giving you your time back, giving people who, right now, for whatever reason, can't drive, there's huge opportunity there, and goods movement that it can be done more efficiently and be done in, I'll say, the off times of when people movement needs to happen.

Okay. I'm still saving time a little bit later to get there. So if we think about just sort of EV evolution, where do you think EV, as a percentage of sales, will be, let's say, in 2030 for the market as a whole? There's an EPA proposal in the U.S. that's like 54% to 60% of EVs by 2030. California's band on ICE cars by 2035. Europe is kind of similar. Canada is pretty similar. China is a little more of a question mark, but obviously the highest EV penetration. So if you have to think about global and by reach, where do you think EV penetration is in 2030?

Well, it's -- a lot of it is driven -- let me start outside of the U.S. Right now, I think a lot of it is being driven by a regulatory environment. So you clearly see that in China. So they'll be driving it, and it's no secret to why they have the highest penetration. I think Europe is following close behind. And I think it's the fastest growing and a pretty large market as well. So I think you'll see those continue. We're the only full-line manufacturer in the United States that has said we'll be -- all of our light duty will be EV by 2035. So we're moving aggressively in the U.S. by the 2030 time frame. We signed on to the President asking the whole industry to the 40% to 50%. And for General Motors, that was electric, not electrified. And so I think -- I believe we'll get there. I know we have the plans to get there. But I think it's really important, and I would also say we're seeing stronger growth and opportunities even in South America from an EV perspective, although that will take a little bit longer. But I think it's important even in the U.S. to not get in front of the customer wanting the vehicle. We've worked hard to have the right range, to have the right safety, to have beautiful design. That's why we've invested in charging. So there's a reason that customer chooses an EV because once they do, I mean, they're more fun to drive. It opens up styling. And so I think with the 60%, what is in the current EPA proposal, we're very supportive of what we need to do from a climate change perspective, but we've got to make sure the permitting to get there, you've got to get the permitting and a little improvement there, but there's much more that needs to be done to get permitting where it needs to be to enable what will -- it'll take to get over 50%. So I think it's very important as we do this, we don't get it in front of enabling the consumer to say, yes, this is what I want as opposed to forcing them that this is what I have to get.

And are there any bottlenecks if -- through a series of incentives, awareness, et cetera? Is it 50% or 60%? Can the industry get there from a battery cell production perspective, from a lithium refinement perspective, from other commodities? Do you see any gating factors, et cetera?

I think there are several gating factors in the supply chain for sure. So I can't speak for the industry, but with all the steps we're taking, and we announced a further expansion of our arrangement with POSCO today. We -- our plan -- the plans that we're executing, we will have the ability to get there.

What are EV battery costs today roughly on a -- and it doesn't have to be GM-specific. You can sort of generalize about the industry. And how do you see this changing this year amid commodities sort of easing but thinking over the next few years? And I ask that as a foray into, do you ever think that the true powertrain motor plus battery will be at parity with the traditional ICE powertrain?

Well, what's happening with traditional ICE powertrains is they're only getting more expensive because they continue to need to be more fuel efficient. So that curve is -- or that line is going up as battery costs are coming down. There's not a -- there's a lot -- there's not a lot of transparency in battery pricing from an industry perspective. There's a lot of analyst assessments of what they are. But again, as I said before, I think we're in the early days. Some of the battery raw materials are coming down, but they're frankly, still higher than historical levels. So I think making your own luck there. We clearly see when I'm buying a battery cell versus making it, that's a huge differential. And when you think about an EV, the cost right now, it's all about the battery. Controlling that is why we've made the investment in the plants that we're doing. And frankly, everyone's following suit with that now. I think it's important to control that because it is your powertrain. And so I think we are still on our paths. We saw from Gen 2 to what we're doing with Ultium, the 40% reduction. We've said, as we get into later part of this decade, we see another -- that will go to 60% off of that initial base. Use percentages because BRM is moving up and down so much. But as I said, we're still not at -- IRA was important because battery costs are still not at a point where you can get to the mass market, which is this $30,000 to $40,000 vehicle. That's what the bulk of new car sales are, frankly, around the globe, that C segment kind of crossover SUV. So again, I think it's so important, and that's why -- to invest in getting battery cell costs down, getting packed down. We have our first Ultium pack. We already have a lot of continuous improvement we'll be making as we go forward. And I think you'll see that, all of us, as we get our first-generation EVs out there that are purpose-built, not just modified ICE, that you're going to see refinement in cost out, battery chemistry improve, hopefully need less battery raw materials and get it at a much lower price point.

But if I kind of zoom out at a high level and say, okay, well, let's say, a midsized car, it's a 60 or 70-kilowatt battery, it's maybe $150 or $160 today, it's $10,000. And if I have dual motors on that, like the dual motors are close to the cost of an engine today and then the battery is on top of that. So how does that math, and I understand that the ICE engine might be going up, but how does that math ever actually really converge?

It's all about battery chemistry. It's going to be in the cell.

Even if I take the battery in half and say it's $75 per kilowatt hour and have a 70 kilowatt -- $75 and have a 70 battery, it's $5,000 for the battery, and then I still put 2 motors on there, still going to be more than an ICE engine today, won't it be?

I think if you go with what we are today, but again, they're going to continue to get higher. And I think that's just the efficiency that we have to drive. I mean we're making some of our own motors as well, and I think that will help in that. And again, we're first gen. So you look at a lot of the teardown information, we know we can get better. We're already seeing it, and we're dedicating the resources to take the cost out. So I do think that, that line crosses some part in the latter part of the decade, maybe a little bit longer. But we have teams working on it and taking all the knowledge we had from internal combustion engine because there's a lot of commonality to get those costs down.

And when you think about cost, do you think it's -- well, do you think anyone has a structural cost advantage today in EV? So Tesla is arguably on Gen 2.5, right?

You're exactly right. They've already had a couple of opportunities to kind of turn, take cost out. Their battery plant that -- are generally up and running. So they've got the scale. I mean, where we're at right now, we're just ramping up. So our costs, just with the extra manpower you have ramping up, we're not running the facility at full tilt and we have so many facilities starting up right now. But like we still believe that we'll get to that low to mid-single-digit margins in '25 and then improve from there. And what we've said in our '21 Investor Day, we still believe is possible. But clearly, if you're ramped up already and you've got scale, you're going to have an advantage over those who are ramping up.

Right. Well, I guess 2 questions on that, and you've been in the auto industry your whole career. So I mean reflecting on that, can an automaker have a structural cost advantage that is durable?

No, I think...

And are there examples? And you could argue maybe Toyota, when they went to lean, had it for a few years. Maybe Chinese manufacturers, because of domestic labor, have it for a few years, but then things become global. But I'm just wondering, like, just conceptually, can an auto company have a sustainable cost advantage?

I agree with you that so many of the innovations, they can be copied. I mean we all tear down each other's vehicles. We know what they did. We have great engineers. And I think what can be a differentiator is not a culture of innovation along -- matched with a culture of efficiency. And when you look back in General Motor's history, there was a point in time where we had both as General Motors was formed. Quite an entrepreneurial company, quite innovative, leading -- cost position very strong. And then we didn't have that. And that's what we're working so hard to get now and have infused innovation wins, and having leading technology is key to keep differentiating yourself, having strong brands, having beautiful design. I think when we look at the strength of our EV portfolio that we're rolling out by the end of the year, we'll have 9 EVs. The demand that we're seeing for them, they're beautiful, how their interior is designed the right level of luxury, especially on the Cadillacs, or safety performance, et cetera. I think being able to do that and get scale is something that you've got to always stay on the front edge. But I think it's cultural. It's like, do you have this mindset that I'm going to continue to innovate while continuing to take cost out? And I think it's an -- we haven't always been good at that. That's what we're driving at General Motors.

And you mentioned that Tesla is sort of one platform or 1.5 platforms ahead of pretty well everyone else in the industry.

Turns, yes.

So again, if we roll that tape forward and we think about, okay, well, if Tesla's 1 or 1.5 turns ahead of pretty well everyone. And you have a player that -- and each successive turn provides lower cost, right? So they're further down that cost improvement path. If they're willing to have midline margins, doesn't that make it very, very tough for everyone else who's a generation behind or a platform behind?

Well, first of all, it doesn't take -- if you're -- you can catch up quickly. Again, as we look on the vehicles that we have right now, we've already seen a lot of improvement. We saw improvement from the Bolt to what we're doing. So you're going to have that -- I think you can -- it doesn't take a whole cycle to catch up to where you could say the industry leader is. So I think there's that element of it. But I would also say customers want new. They want new styling. I mean we don't all drive around in -- and choose between a 2, 4 or 6 or 8-person unit that moves us around. People -- we're in a fashion business as well, and where people want a car that represents them, it has to represent their life, sometimes their livelihood. But from a styling perspective -- so I think we have to remember that piece of it, and it's not just I can design something that is very aerodynamic, so it gives me the best battery efficiency and -- not everyone wants to drive that. And so I think understanding and driving the efficiency with not just replicating today's very complex global ICE portfolio, but really looking strategically. When you look at, I think, where we're going to be in '25, I think we'll be covering only 50% of the segments, but 70% of the volume. And so I think there's a way that you can lead with the right technology, beautiful design and constantly be challenging yourself to get costs out. I don't think it's a permanent lead. We've seen it time and time again. You mentioned a -- you have a lead because you're doing something innovative. People can copy it or -- then they pass you.

Right. And I think I totally agree with that at end state. I guess the question is in the interim state, right, because Tesla will be coming out with their next-generation lower-cost platforms, which will be at least 2 units, we think 4 ultimately, at lower cost. And so if they're setting a cost bar that's still ahead of most for the next 4 or 5 years and they're willing to take margins that are relatively low, I just wonder how difficult it might be in that interim period. I agree at end state, things kind of normalize, people copy each other, technologies become more broadly adopted, particularly among large vendors. I think it's much more difficult around small vendors. So it's really that next 3 or 4 years, whether Tesla, having had this 5-year head start kind of on everyone else, continues to man itself -- manifest itself in a lower cost structure. And my next question was sort of like they have cut price. What has that meant for you? And as they become a broader portfolio and you become a broader portfolio in EVs, if ultimately they are a generation ahead for 3 or 4 more years, they're willing to take 6% operating margins, isn't that going to be really tough for everyone else?

I don't think so. Because I think even right now, with the price cuts they're taking, we're still seeing it with a lot of the EVs that we're selling, there's no one in our market -- or no one in a direct competitor from a Tesla perspective or frankly, I can't get enough LYRIQs out of the factory. We're ramping that up right now and really ramping up the battery plants in the module and pack plants, and that's what's gating. But people want that vehicle. And I think you have to have a beautiful vehicle. People don't want older technology. So -- and I would say it's an ICE example, but I think it talks to the capability. I mean, if you look at General Motors, every new product we put out is more fuel efficient, weighs less, has a lot of innovation. We just were revealing or launching and selling the Chevrolet Trax, and it starts at $22,000, and that platform makes money. So -- and if you look at it, the screens, the technology, the active safety in those vehicles, we found a way to do that. So I think we can take all the lessons we've had in a lot of aspects from ICE and then quickly apply it, and there's really only one area we're focused on to get to parity from a cost perspective. And I would say a lot of our disadvantage right now isn't the design, it's more the ramping up. And once we get there -- we'll go through this ramp-up of battery plants. And once we get that going, that kind of check. And from a large OEM, I would say, a traditional OEM perspective, we're ahead of everyone else in getting those battery plants up and running.

For the industry, when do Level 4 and Level 5 autonomy become widespread?

Well, I think we're growing pretty rapidly right now. Cruise has its milestone out for 2025 from -- I think it's $1 billion in revenue. And so I think when we're looking to grow that, I think it's going to be something we're going to see in the latter part of this decade that I think is going to become quite common. And like I said, rideshare, goods movement, but then personal autonomous vehicles, you will see it in this decade being available, more widespread than I think most people think.

So a couple of questions. So I think Cruise was $100 million in '22. Your target is $1 billion in '25. What ultimately drives that? Is it just more broad adoption means that you have it...

More rides. And right now, we don't -- we can't give -- we have more demand for rides then we have of vehicles. That's why we keep expanding the fleet. That's why getting the Origin out there is so important, and that testing is going well in Austin, and it's a game changer. So we've got a plant already ready to build and scale those vehicles. We hired Gil West, who was the COO of Delta. He's now at Cruise. So if you think about Kyle as the CEO, CTO and founder, the technology is now -- we're able to scale it pretty quickly. And think about what you need to do to run a city to run an autonomous fleet, it's frankly, simpler than running an airline from getting the vehicles where they need to be, getting them charged, making sure they're clean. And the Cruise already has their own app. It's actually -- it's quite good. And so I think -- and what we also see is once people take a ride, they're over -- I think it's over 80% more likely to take another ride. And the reason that's not higher is in some cases, they're still saying, well, I can't take a ride with you because you don't go where I need to go, yes. So as we keep expanding cities, we keep expanding -- get the speed up -- we're kind of in more of, I'll say, good weather states. As -- we've already solved rain, we've solved fog. Now we're working -- we got to solve snow. We will do that. I have complete confidence. I think it's going to scale quite rapidly, and it will just be the number of rides. But the demand is there because people, when they go through the experience, they're like, this is great. I'm not listening to someone else's music. I know the vehicle is following all the traffic laws. They're not driving erratically. It's a clean, welcoming environment. So I mean there's a lot, it's just a better experience.

And how about from a regulatory perspective? Because typically, you've had more limited hours, some restrictions on number of vehicles, et cetera. So from a commercial side, when -- like, is regulatory a gating factor? And why are you so confident? And then from an individual ownership side, how do you think about Level 4 and Level 5 autonomy?

Yes. I think clearly, I mean, there are certain states, municipalities in the U.S. that are more regulatory-focused than others. I think one of the reasons you saw us move quickly to Texas and Arizona, a much more welcoming regulatory environment. But we're making good progress now in the 24 -- 7x7, 24/7 in San Francisco and working on that. At the federal level, we're having good progress on what we need. And frankly, the path to getting Origins out on the road, I feel very confident about with how we're working there. So I think in the early days, I think Cruise is plowing a lot of ground in getting the regulatory environment set up. But again, I think once municipalities see the success of it, the safety of it -- again, it's a better way to move people. It's a safer way to move people. I think there's going to be higher adoption. And I give great credit to Cruise and GM working together because there's been a focus on safety at every step of the way. And Cruise gets to leverage all the safety expertise that GM has and our relationships with the regulators. So I think we're in this phase now, but I think in not that long months and years, it will really be how fast can we scale, get to the different cities as opposed to the regulatory environment being a barrier.

But does each municipality ultimately have to go through the same process San Francisco did, which is sort of a more gradual adoption over time, limited vehicles, limited hours, et cetera? Or they...

Not at all. I mean in Arizona and Texas, it's completely different. It's like here, you're welcome and it's completely opened up. I think one of the most stringent regulatory environments is San Francisco because it was even -- you're talking about -- thinking about 7x7 and as you expanded and keep the operating diameter, it was a new permit. And then you had to wait. Once you could even -- you get the permit to operate in it, then you had to get another permit to be able to charge for a ride in it. I think that -- and they were the first. But I think we're already seeing a very different regulatory environment in Texas and Arizona.

And what -- and again, the $50 billion in 2030, is that all commercial? And is that all U.S. in terms of the Cruise target for revenues? Like, how do -- where does that number come from?

Well, it's a pretty detailed business plan that they have. But remember, we also have exclusive arrangement in Dubai. And one of our partners is Honda, so there's the opportunity in Japan. And it's people movement, it's goods movement. I don't want to give you our whole strategy between now and 2030, but I would say it's a very robust plan.

And what is the path and time frame for Cruise to break even?

We have not talked about that publicly, and I think that's Kyle's to share. You're going to hear more from Kyle this year. Laying out -- putting more meat on the bone of what the business plan is and the growth targets and milestones that we can be held accountable to, that's Kyle's to share.

And I think you've also talked about Altify being $20 billion to $25 billion in annual revenues in software and services. Maybe we can talk a little bit about what you envision those being and...

Yes. I think it builds on OnStar. And unlike a lot of OEMs, we already have the knowledge of having OnStar in the vehicle for 25 years, of knowing what a consumer will pay for and what they expect to be with the vehicle. And I think you've seen some other OEMs start to say, oh, and now I'm going to charge you for heated seats. Well, people don't care if they're buying a $30,000 vehicle or $130,000 vehicle. So I think heated seats should be a part of it. You can't all of a sudden turn it off and say, now pay me for it. But what we've seen very much, willingness is something that's above and beyond, like the safety security service we provide, the wireless -- having your vehicle be a hot spot. And then there's additional services customization. An interesting thing, one of the leading EVs in China is the Hong Guang Mini. It's a very affordable vehicle, but a lot of profitability on that vehicle has come from people, even though they're buying, I'll say, a very value-based vehicle, they want to customize it. They want to personalize it. They want to make it their own. And so lighting in the vehicle, how the screens look, there's a lot that people can do from a personalization that they've already demonstrated they're willing to pay for. The next thing is they're willing to pay for something -- if I buy my vehicle today, in 2 years from now, there's something that's been invented that's new or a new service or a new feature. People are willing to pay for that. And so I think there's a lot of opportunity. The team has already done a lot of work. We've done a lot of research in understanding what the consumer will pay for and what they won't. But I also think with the addition of Mike Abbott and some of the -- and Edward Kummer, who joined us about a year ago, who has Disney and Nordstrom experience, along with Mike's experience, I think we're bringing outside talent that has experience in that space, not just relying on, I'll say, traditional OE experience.

Right. Yes, I just -- the $20 billion to $25 billion is several thousand dollars per car, obviously. You've done the math. And I just -- like, you mentioned hot spots and it's a pretty nominal amount, maybe $10 a month. But I even think about, well, there were great hot spot businesses in airports and stuff. And now, like, it's just accepted that you get free hot spot everywhere. And again, it sort of goes to this notion of what ultimately becomes table stakes in terms of expected levels of offerings going forward? And how do you have confidence that -- because often, consumers will say, oh, that's great. I would definitely pay for that. But 2 things happen. One, push comes to shove, they don't really want to pay for it. But more importantly, you have a competitor, who's trying to be aggressive in the marketplace, who's putting together a more fully specced vehicle where some of that's being embedded in. So how do you get -- and this is obviously like a really key question for the whole industry. And you and others are talking about this. But I'm just wondering where the conviction comes from in terms of -- because it's a really different change from, I think, how consumers will consume their automobiles going forward. But I also think it's a really different change in terms of behavior because historically, so much of that has just ultimately become embedded in functionality in cars. And I wonder if the industry can help itself from doing it again.

Well, that's a very good question. But I think -- so a couple of things. First of all, it's not thousands of dollars per vehicle, by the way, in the models that we need to get there. So just for the record on that. But again...

I just did, like, 5 million units to get to $25 billion is $5,000...

But remember, it's annual. And think about the number of vehicles. We sell more vehicles in the United States than anyone else. We have #1 and #2 in South America in many markets. Even though I think we'll have a different presence in China, we'll use Chinese technology for -- in China for China. I still think we're going to have significant sales there. We have a huge growth opportunity in Europe and to go in, in a very targeted way with differentiated products. So -- and then again, it's not that -- it's not just a time of purchase but it's -- and it's not just the first owner, but because of the connectivity, you've got then the relationship with the second and third owner. So think about a fleet and multiply not just how many vehicles you sell a year to begin with. But again, I think it's going to be not just one single answer. First off, I think the industry has learned a great deal through COVID. And at least you see General Motors being very disciplined. I think when we took down our truck plant earlier this year, it was misinterpreted because we kept our inventory flat. We said we're going to manage our inventory, and we kept that flat. We actually sold more vehicles and gained market share. And so that kind of discipline, I think, is what hopefully the industry has seen that they can maintain the margins and have the right business as opposed to some of the really bad behavior in the past. And frankly, some of those leaders who kind of led with that, they're not in the industry any longer. So it remains to be seen, so it's a fair point. But I can tell you, General Motors has been, frankly, quite disciplined as we came through the restructuring in the '08, '09 time frame, so you can look back and see that. But I also think there's an innovation piece of it because, again, people eventually will say, well, why doesn't that come with my vehicle? But if you're giving them something new, they are willing to pay for it. And we've seen that over time with OnStar, 25 years in the business and a pretty strong acceptance rate and willingness to pay.

You mentioned China. Maybe you can talk a little bit about how important China is to GM today. I think there have been some share losses over the last 5 years. Can you talk about its importance to GM? And will 4 nonluxury brands be able to really gain share in China going forward given how challenged and competitive that market is?

Well, I think if you look at where the market is, I think there's still -- China is still in a recession. I think over the mid- to longer term, there's still growth potential there. I think there's going to be a sorting. As I mentioned before, I think there's over 100 new start-up OEMs. The industry is -- most of them don't make money. They're operating at 50% capacity. That's not sustainable. So there's going to be a sorting that's going to happen there. I think we need to do better, and this is a key year for us because in the next, I'll say, 12 to 18 months, with the Ultium-based products that we're rolling out, I think it's going to be critical for us to demonstrate that there is room for Cadillac, Buick and Chevy to a certain point to have a unique offering and participate at the more luxury and premium segment of the marketplace.

And so do you think it's really just been the mix shift to EVs? Because EVs are, like, 30% of sales. And China today, that has contributed to the market share -- or do you feel that the market share deterioration -- do you feel that there have been other sort of GM execution issues that have impacted...

I think we were slower than we should have been in moving to EVs, and we've addressed that along a number of fronts than we should have been. So I think -- so yes, I think there's a piece of it that GM owns from not having the right portfolio fast enough, and we're correcting that right now. But I also think there has been a fundamental shift as the industry has moved to EVs. I think there's a different and more welcoming acceptance of some of the domestic brands. But there still is a sorting that has to happen there because what's going -- and I was just there last week. So did a complete competitive review of what's going on and looked at the structural issues, and they're not sustainable. So there'll be a sorting there. Again, I think when you look at the heritage of the Buick brand, the success we've had with the Cadillac brand, I think there's true staying power there with the right entries, and we're launching as we speak.

Right. Well, we're just about at the end of our time. Is there any message you'd like to leave with investors?

Well, I think yes, General Motors is 100-year-old company, but we are really well positioned with where we're at from EVs, and this is a critical year as we launch products we know customers want to have. We're at the very early stages of what is going to be a tremendous business with Cruise and autonomous and moving to personal electronic vehicles -- personal autonomous vehicles and then the whole connectivity piece is just a growth opportunity for us. And I'd also like to highlight our leadership team. Half of our leadership team is from other industries. And Mike being the latest addition, but our CHRO has grown up in tech, Alan Wexler, who came -- who's been in advertising and innovation. So if you look at the leadership team and dig into General Motors, we're a very new leadership team. And frankly, with the separation program that we just did, we reduced 15% of our leadership ranks. We don't plan on replacing that. So we're going to be leaner. And the average age of most of our technical -- average seniority of most of our technical resources is around 5 years or less. So we're a very different company than most people think. This is our year to really demonstrate in EV/AV and then connectivity will continue to expand over the next couple of years. So I've been in this role for 9 years. I've been in this industry for 40, and this is the most exciting time I've ever seen. So you highlighted well all the challenges. I think that when you look at our performance, even right now, we're still seeing strong demand, strong pricing. We're holding -- our inventories actually went down a titch month-to-month and relatively flat from an incentive perspective. So I think that speaks to the strength of our products. So I'm excited.

Well, thank you for being here. We appreciate it.

Thank you.