General Motors Company (GM) Earnings Call Transcript & Summary

Good morning, and welcome to the General Motors Company Second Quarter 2026 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded, Tuesday, July 21, 2026. I would now like to turn the conference over to Ashish Kohli, GM's Vice President of Investor Relations.

Thanks, Julie, and good morning, everyone. We appreciate you joining us as we review GM's financial results for the second quarter of 2026. Our conference call materials were issued this morning and are available on GM's Investor Relations website. We are also broadcasting this call via webcast. Joining us today are Mary Barra, GM's Chair and CEO; along with Paul Jacobson, GM's Executive Vice President and CFO. Susan Sheffield, President and CEO of GM Financial will also be joining us for the Q&A portion. On today's call, management will make forward-looking statements about our expectations. These statements are subject to risks and uncertainties that could cause actual results to differ materially. These risks and uncertainties include the factors identified in our filings with the SEC. Please review the safe harbor statement on the first page of our presentation as the content of this call will be governed by this language. And with that, I'm delighted to turn the call over to Mary.

Thanks, Ashish, and good morning, everyone. Today, we reported another solid quarter, driven by the tremendous appeal of our product portfolio, the agility of our team and disciplined execution across the business. Our employees, our dealers and our suppliers are all making important contributions that continue to drive our success. Their commitment enables us to win in a dynamic market, and their efforts are leading us to raise our 2026 guidance for the second time this year. The business continues to perform very well. Customer demand in North America remains steady, including for our pickups and SUVs and pricing is consistent. For example, despite lower than target inventories for most of the year, our share of the U.S. full-size pickup market stands at more than 42% through the first half of the year, which is more than 10 percentage points above our closest competitor and we grew share year-over-year in both the second quarter and the first half. We also achieved our best quarter and first half ever for the new Super Cruise equipped vehicles. Strong commercial demand helped us deliver record full-size pickup deliveries in our fleet business and our U.S. incentive spend has remained well below the industry average for more than 3 years. GM International, inclusive of our China joint ventures was also profitable. Our 8.6% EBIT adjusted margin in North America was up 2.5 points from a year ago, and we continue to strengthen our product portfolio, grow software and services revenue, lower our warranty costs, reduce EV losses, increase operating efficiency and develop new revenue opportunities that drive improved results this year and going forward. This strategy has driven 70 basis points of total company margin expansion over the last 3 years, while our broader peer set has seen margin reduction by 400 basis points. All of this includes the impact of tariffs. We haven't made excuses, we've just continued to perform. At the same time, our operating discipline has been a key driver of the structural improvement in our adjusted automotive free cash flow generation, which has improved from $3 billion to $5 billion annually on average over the last decade to consistently above $10 billion since 2022. We expect these trends will continue to strengthen our performance into 2027 and beyond because we have multiple engines of margin expansion and growth, while maintaining our capital discipline. We built a strong EBIT foundation with new and redesigned vehicles like the Chevrolet Trax, Equinox and Traverse, the revitalization of Buick. The success of sub-brands like the Denali and AT4 and icons like the Chevrolet Corvette and the Cadillac Escalade. For example, since 2020, we have increased the EBIT profitability per unit of our crossover portfolio by 4x, while our full-size pickup and full-size SUV segments are each up over 25%. Our next major launch, the next-generation Chevrolet Silverado and GMC Sierra light-duty pickups will further separate us from key competitors when they begin arriving in showrooms in December. The truck will deliver improved ride quality, power, durability and towing capability. We have also significantly elevated the exterior and interior design to increase their presence, refinement and appeal. We plan to maintain record production volumes year-over-year, while launching the trucks at 3 assembly plants, along with our next-generation V8 engines, which are launching at 3 propulsion plants. We are also increasing capacity for full-size SUVs. Starting next spring and continuing into 2028, we will begin launching the next generation of Cadillac ICE vehicles, including the all-new CT5, XT5 and XT6, which will complement the Escalade and the brand's luxury segment leading EV portfolio, the Escalade IQ, VISTIQ, LYRIQ and OPTIQ. And we are onshoring significant manufacturing starting next year, which will bring our U.S. production capacity to more than 2 million units and further reduce our tariff exposure. At the same time, our high-margin software and services revenues continue to grow rapidly with 1 million new subscriptions expected this year, contributing to more than $3 billion in recognized revenue. Next year, the growth should be even higher because we're making Super Cruise standard in high-end Silverado and Sierra trends and optional on most everything else. We're estimating 160,000 incremental Super Cruise units from this product enhancement strategy. Alongside our core vehicle portfolio and software growth, new business initiatives like GM Insurance and GM Defense are reaching critical mass because we offer unique value propositions. For example, when a customer purchases GM Insurance, we create a reoccurring revenue stream from premiums, along with incremental parts and vehicle sales, all while driving customer loyalty and higher satisfaction. The business has scaled from 3 states in early 2024 to 21 states today, making GM insurance available to over 60% of GM's U.S. sales, and we are on track to reach over 80% in the near term. GM Defense is another compelling growth opportunity that enables us to deliver defense solutions faster with better economics for the U.S. taxpayer. The Chevrolet Colorado-based inventory squad vehicle is case in point. After initial multiyear order of about 1,200 ISVs, the U.S. Army now plans to procure more than 10,000 if the appropriations is passed. We're building momentum with other products and customers, including the U.S. State Department and Secret Service as well as Canada, Qatar, Brazil and other allies. And we're also supplying battery propulsion technology to Lunar outputs, which has been awarded $220 million NASA contract to build the next-generation Lunar terrain vehicle. GM Defense expects 2026 revenue to grow to almost $700 million and is targeting positive results on an EBIT basis for this year, while also building a backlog of future business. We are expecting a top line revenue CAGR for GM Defense of more than 30% over the next several years with double-digit margins. This includes ISV awards that are expected to exceed $1 billion based on the U.S. Army's procurement objectives. We are also working with Lockheed Martin and other leading companies to expand speed, scale and resilience in the defense industrial base. We are focusing our efforts on strengthening supply chain management, improving manufacturing readiness and expanding production capacity in ways that serve the United States and its allies well. Over time, all of this should make GM Defense a more meaningful and diversified contributor to our earnings. With that, I'll turn it over to Paul.

Thank you, Mary, and I appreciate everyone joining us this morning. I also want to begin by recognizing the entire GM team whose hard work and consistent execution quarter after quarter underpin the solid results we're reporting today. In the first half of the year, we generated $92 billion in revenue and $8.2 billion of EBIT adjusted. EPS diluted adjusted increased more than 35% year-over-year to $7.27 a share. This was our best first half EPS diluted adjusted performance ever, more than 25% above the prior high. Put simply, in just 6 months, we delivered an EPS result that was better than 6 of our last 10 full years. A clear reflection of how GM has transformed itself over the past decade by strengthening our product portfolio to drive revenue growth, improving core operating performance, lowering costs and materially reducing our share count through significant share repurchases. We also maintained our pricing discipline with incentives as a percentage of MSRP running 1.5 to 2 points below the industry average, helping to improve total company margin by 1.8 points year-over-year in the first half alone. In addition, fleet sales have been strong with our best first half in more than 5 years, including our highest government sales since 2009 and record full-size pickup sales, driven by strong commercial demand. Importantly, the growth in fleet comes without diluting margin. Year-over-year, our market share was down by about 60 basis points versus the first half of 2025 largely reflecting 3 factors: one, strategic decisions to discontinue certain vehicles in our portfolio, including the Chevrolet Malibu and the Cadillac XT4. Two, a smaller EV market following reductions in consumer incentives. And three, tight dealer inventory early in the year, which was at a low point in January and February. But as Mary mentioned, the investments we are making to onshore production launch key vehicles and expand full-size SUV capacity will give us more flexibility and position us to grow revenue, gain market share and improved profitability in 2027. On capital allocation, our strong first half adjusted automotive free cash flow of $6.3 billion allowed us to continue executing against our share buyback program. In the second quarter, we made $2 billion in open market share repurchases, retiring approximately 25 million shares which brings our first half total to $2.8 billion repurchased and 36 million shares retired. This is nearly $1 billion more than the first half of last year, despite our EV restructuring efforts. We ended the second quarter with a diluted share count of 893 million, approximately 8% below where we ended the second quarter of 2025 and 35% below the second quarter of 2023. We have $3.5 billion remaining under our current repurchase authorization and expect to continue to consistently repurchase shares, supported by strong cash flow and our ending Q2 automotive cash balance of $19.7 billion. Now let's turn to the second quarter financial results in more detail. Total company revenue of $48 billion was up $900 million year-over-year, driven by higher wholesale volumes, reflecting higher ICE volumes in both North America and South America, partially offset by lower EV volumes. EBIT adjusted of $3.9 billion was up $900 million year-over-year. The improvement was driven primarily by core business performance supported by stronger pricing and lower costs including EV, warranty and emissions-related regulatory tailwinds. Adjusted automotive free cash flow of $5 billion was up $2.2 billion year-over-year. The improvement was driven by higher earnings and timing of both tariff reimbursements and CapEx spending. Let me now update you on our EV-related restructuring. In the second quarter, we recorded $2.3 billion in incremental charges. Of that amount, $900 million was supplier-related cash charges, $700 million in cash charges to rightsize the battery supply chain with our joint venture partners and $700 million were noncash write-offs for compliance related and other asset impairments. In total, we have recorded $10.9 billion of EV-related charges since the second half of 2025, of which approximately $7.2 billion will have a cash impact. Through the end of the second quarter, we paid $4.5 billion of this amount. Our teams have worked tirelessly with our partners and suppliers across the EV value chain to conclude these negotiations quickly. I'm proud to say that we believe these actions substantially complete the material cash charges we expect to incur, as we align our EV capacity and manufacturing footprint with the changes in regulatory policy. While circumstances may change in the future, and we may have some true-ups, it's important to get this work behind us. Now let's move to our second quarter regional results. North America delivered EBIT adjusted of $3.4 billion, up $1 billion or over 40% year-over-year. Margin was 8.6%, an improvement of 2.5 points from a year ago when tariffs were first put into place. Having worked through much of that pressure, we are solidly back within our 8% to 10% margin target, a clear marker of the progress this team has made. The improvement was broad-based, driven by strong pricing, lower EV losses from rightsizing our capacity along with continued warranty and emissions-related regulatory tailwinds. These gains were partially offset by commodity inflation, including logistics and higher DRAM costs, along with manufacturing costs related to onshoring production to the U.S. Total U.S. dealer inventory ended the quarter at 511,000 units or approximately 55 days of supply. This is right in the middle of our targeted range of 50 to 60 days. GM International, excluding China equity income, delivered EBIT-adjusted of $100 million, driven by strong execution across most of the regions. While Middle East wholesales were significantly impacted by shipping disruptions, strong sales performance in South America partially offset this headwind. China equity income was $100 million, the team deserves a lot of credit for the restructuring work they did to enable us to be profitable despite the very difficult environment. We remain focused on execution, cost efficiencies and mix optimization to deliver ongoing profitability. GM Financial delivered EBT adjusted of $600 million and paid $250 million in dividends to GM in the quarter, reinforcing our strategic value within the enterprise. Since 2019, GMF has grown its balance sheet by more than 25%, while outperforming other captive finance companies on profitability and growth. This performance reflects disciplined execution and the ability to generate consistent, risk-appropriate returns and is further supported by GM Financial, maintaining its leadership position in manufacturer loyalty for 10 consecutive years. The business remains within its full year EBT adjusted guidance of $2.5 billion to $3 billion and is on track to pay full year dividends to GM similar to last year. Based on our strong operating performance, including improved pricing and warranty assumptions, as well as a slightly better commodity outlook, we are raising our full year guidance across all of our key metrics. We now expect EBIT adjusted of $14 billion to $16 billion, up from $13.5 billion to $15.5 billion. EPS diluted adjusted of $12 to $14, up from $11.50 to $13.50 per share, and adjusted automotive free cash flow of $9.5 billion to $11.5 billion, up from $9 billion to $11 billion previously. Before I address the key assumptions underlying our updated full year guidance, I want to note that it assumes no material escalation in the Middle East and no significant increase in commodity or other inflationary pressures from current levels. Starting with the industry backdrop, we continue to assume U.S. total SAAR in the low 16 million unit range for the full year, consistent with where it has run year-to-date. North America ICE wholesales were up approximately 1% in the first half, and we expect second half year-over-year volumes to be up in a similar range. We continue to be constrained by full-size truck production, including the impact of the new truck launch and the planned discontinuation of certain vehicles we referenced earlier. Turning to EVs. We continue to expect losses to improve by $1 billion to $1.5 billion for the full year, driven by rightsizing our EV capacity and significantly lower volume. In the first half, we realized approximately $500 million of this benefit. We expect EV wholesale volumes to be up slightly in the second half, as we resume building to demand. Warranty is tracking to a $1 billion to $1.5 billion improvement year-over-year for the full year, above our previous assumption of up $1 billion. We realized $500 million in the first half and expect most of the remaining benefit flow through in the third quarter. emissions-related regulatory savings remain on track as well. We continue to expect a full year benefit of $500 million to $750 million primarily from lower regulatory credit amortization. We recognized approximately $400 million in the first half and expect a smaller benefit in the second half as we begin to lap the savings that started in the second half of 2025. On pricing, we recognized a $600 million year-over-year benefit in the first half and now expect full year North America pricing to be up around 0.5%, which is at the high end of our prior guidance. The pricing benefit is expected to be smaller in the second half, as we lap last year's 2026 model year price increases. We continue to expect gross tariff costs of $2.5 billion to $3.5 billion for the full year, which is largely flat year-over-year. Through the first half, we incurred approximately $1.3 billion net of the $500 million EPA benefit recognized in the first quarter. We expect the gross tariff impact in each of the third and fourth quarters to be similar to the impact of the second, which was around $900 million. Let's now turn to the headwinds. We continue to expect commodity inflation, logistics and higher DRAM cost to be a headwind of $1.5 billion to $2 billion for the full year. We realized approximately $600 million in commodity costs in the first half and expect that headwind to increase in the second half, largely because it reflects 2 quarters of higher costs rather than just 1. In addition, spot rates continued to rise after our first quarter earnings call. And while they have eased somewhat recently, several commodities remain above those levels. Also, given the lag in how these costs flow through our results, the recent improvement should begin to benefit us in the fourth quarter and into early 2027. On DRAM specifically, our expanded collaboration with Micron strengthens access to critical memory technologies and deepens integration across our vehicle platforms, reinforcing supply availability for the long term. Separately, we're also investing approximately $1 billion to $1.5 billion this year to onshore production to the U.S., strengthen our supply chain and expand our software capabilities. We incurred approximately $400 million in the first half, and we expect these costs to ramp further in the second half as we approach production in 2027. Finally, turning to our international operations. We continue to expect some softness in GM International ex-China, reflecting the dynamic environment in the Middle East. From a cadence perspective, we expect the fourth quarter to be somewhat weaker than typical seasonal patterns would imply primarily due to the launch of our new full-size trucks, including higher launch-related costs and anticipated year-over-year volume headwind of approximately 35,000 units. We also expect onshoring costs to build as the year progresses, with the fourth quarter having the largest impact as we prepare to transfer escalate production to Orion assembly. Before I close, I want to take a moment to underscore the strength of our core business. In North America, margins have returned to our 8% to 10% target range, and we are winning in the segments that matter most, including full-size trucks and while maintaining disciplined pricing and inventory levels. That strength provides the foundation for everything else we are building. Our OnStar digital business, including Super Cruise, remains a growing margin accretive asset. Subscriber growth drove deferred revenue to $6.3 billion, up almost 50% from a year ago, while second quarter recognized revenue was $800 million, up 20% year-over-year and well on pace to hit our full year growth target of $400 million. This momentum carries into 2027, where amortization of our existing deferred and subscriber growth is expected to drive double-digit growth in realized revenue building on our estimated full year 2026 realized revenue of more than $3 billion. We are also building a select number of adjacent higher-margin businesses, including GM Defense and GM Insurance in a capital-efficient manner that leverages our capabilities. These businesses are modest contributors today, but we are optimistic about the long-term opportunities they present and will continue to share progress as they scale. While our primary focus is to deliver on our 2026 commitments, we are already looking ahead to 2027. And as Mary mentioned, based on what we know today, we believe we can grow revenue, margins, EBIT and free cash flow next year. Several drivers support this view, including continued improvement in EV profitability, growth in OnStar digital revenue, incremental warranty improvements, fixed cost efficiencies, a full year of our all-new Chevy Silverado and GMC Sierra pickups and increased full-size SUV supply to meet demand in the U.S. and in markets around the world. Additionally, as we also continue to repurchase shares, we can expect even further EPS growth. With a broad portfolio of EV and ICE vehicles, we are well positioned to capture demand across segments and continue delivering ongoing value for both our customers and our shareholders. And with that, we'll move to the Q&A portion of the call.

[Operator Instructions] Our first question comes from the line of Joe Spak with UBS.

Paul, I actually wanted to start with some of the commentary you just made on Super Cruise. And Mary, you mentioned the plus 160,000 Super Cruise able pick up standard on the high-end trims and option and everything else. So it's good to see that scaling. But like right now, I think it's really only available on the high country on the Silverado. That's like a $6,000, $7,000 package, maybe there's some discounts from time. So -- and even if we look across other vehicles, it looks like it's at least a [ $4,000 ] option. So that seems like it could be a pretty big potential tailwind to pricing in '27, and I know you alluded to sort of tech as a pricing tailwind for '27. But I guess what I'm really curious about here is, one, are we -- should we also expect Super Cruise to scale, at least from an availability perspective across other vehicles? And then two, are you changing the pricing structure of Super Cruise at all as you democratize the solution either to the upfront cost or the eventual monthly charge?

So Joe, we continually evaluate based on customer reception of Super Cruise of how we expanded and are also looking at pricing. So I don't have anything specific to announce today, but we do see the opportunity for the growth that we're going to see with the full-size truck launch, the light duties. And also, we're expanding in 3 regions and continuing to add more miles. So we think it's an option that customers like. We have a very high attach rate when they go out of their -- out of the period that are included in the price of the vehicle. So we're pretty optimistic that we're going to continue to grow that business. Did I miss anything there?

I'd just add, Joe, that this is pretty consistent with what we've been saying for the last few years. The vehicles that are coming up on the end of the 3 years were produced at the tail end of the chip crisis, and we know Super Cruise was one of the more impacted on we're starting to see the scale, but I think it's not just '27, it's beyond that, and that's why we keep leaning into the digital revenue story with $6.3 billion of deferred revenue on the balance sheet already. That's approaching $7.5 billion by the end of the year. And as Mary mentioned, the 1 million additional this year across the digital portfolio. Super Cruise is a piece of that. So we're seeing really encouraging attachment rates in the 30% to 40% range, as Mary mentioned, and now the next strategy is how do you proliferate it? How do you expand it to make it more available that's possible as we get cost down and as the product continues to evolve. So it's not just about '27, we think it goes even beyond that and why we've spent a good bit of time talking about what the future looks like across the entirety of a GM car park that's got software-enabled features.

Second one is just on warranty, which seems like it was -- it's sort of coming in more favorable. I was wondering if you could maybe quantify how much warranty helped on a year-over-year basis in the quarter. And then if I recall, I think it's the third quarter where you typically have this reevaluation and potential reset of accrual rates. So with respect to your full year commentary on warranty, I just I just want to make sure that really that's sort of the better experience you've seen to date and then there's maybe some potential for a reset to lower accruals later this year as well. Is that correct?

Yes. So as we said in the prepared remarks, Joe, it's about $500 million of benefit in the first half of the year. And we increased from $1 billion year-over-year tailwind to $1 billion to $1.5 billion. That's really as we're starting to look at what the September quarter Q3 adjustment will be and as we go forward. So we continue to see some good trends. It's not without some new challenges that pop up from time to time. But I think the team overall is executing well. And we think that this is part of the multiyear tailwind. So ideally, as we've talked about before, the monthly cash outflows plateau and then start to come down as we get through some of these historic quality spills, et cetera. And that's where we can see benefit into '27 and '28 beyond what we're seeing in '26.

I would also say we're using a lot of initial tool simulation, artificial intelligence to find problems earlier and make sure we validate more, which is going to be evident in the truck that we're launching. So there's a lot going on to make sure the products are of higher quality and even looking at the longer-term durability as well.

The next question comes from Dan Levy with Barclays.

Just wanted to start with the question on the 2026 guidance. I think when we add up some of the pieces here between better pricing, better warranty looks like your wholesales are slightly better and then you're talking about slightly better commodities. It seems to add up to somewhat more than the guidance raise that you should. I know there is a range and whatnot. But maybe you could just talk to what potential offsets there are versus all of those positives?

Dan, thanks for the question. On the commodity piece, I don't -- I want to make sure that we're really clear. I don't think we are projecting lower commodity prices for the second half than the first half. What we saw when we raised the cost guidance in Q1, we continue to see prices increase after that first quarter earnings date. So while we've seen a little bit of coming off of it, it's still right in line with where our cost guidance and commodity guidance has been. So the reason for the guidance raise is, okay, if we believe that it's plateaued here, we can bank what we've sort of earned ahead of expectations in the first half of the year. So that's why we wanted to be cautious and say it doesn't assume that we have significantly more inflation -- up of conflict, et cetera. So I just want to make sure that we're not confusing that with a tailwind from where we were just a few months ago. It really has stabilized a bit at those estimated levels. So when you think about the year, we know that some of the cost pressures that we talked about, as we ramp up Orion and make the investments and some of the DRAM inflation was backloaded. But what we're saying is the initiatives that we've undertaken, the benefits that we're seeing in pricing and warranty are helping to overcome that and give us more confidence about the full year given our first half outperformance. Sorry, that was a long answer.

Great. As a second question, I wanted to double-click on the new truck launch. And your materials point to opportunity on the pricing side. Now I think anyone that's just looking at the third-party data fees just how well the trucks are doing this very, very dominant share, imagine that, that's somewhat contributing to your pricing strength as well. But help us understand from this position of strength that you're in how much incremental benefit there is? I mean, maybe you could talk about what specifically is driving that upside on pricing? And maybe you could put this in context of -- and I know this is a question that keeps on coming up the competitive environment where there's one of your competitors that seems to be in a position where they have to catch up quite a bit, put that in context in the broader environment, where you're already in a very strong position, you're saying things can get even better from here?

Yes. So I think we're incredibly pleased with the current generation of trucks and how they've held up in terms of pricing. We haven't seen the typical heavy discounting at the end of the cycle that I think is permeated historical model. But as you look at every new model year, every new launch like this, we're adding new features, we're adding new functionality across the board, and we'll see an opportunity where we can to potentially take price across the board. We expect really strong demand. As always, there's a little bit of a richer trim mix, as you're starting to ramp up production as well. So I think all of those contribute. But when you look at the strength of the vehicles, the way they've held up the market share strength that we've had, it looks really, really promising. We're excited about the next generation of trucks.

And is the pricing piece partially just a trim comment? Or...

I mean, we haven't made any public comments about how that's going to price. We're going to continue to look at the market. But I would say that we're optimistic as we are with most new vehicle launches.

Right now, the reception has been really strong on the truck. Remember, we're at record levels of production this year. I stated that we're going to maintain those next year, as we're launching as well as new engines. And then there is upside opportunity really as we get into the end of '27, '28 because we've got all the launches going through the year. So we're going to build on a really strong year with what we think is the truck customers are going to love from a performance perspective and design performance technology. So I think it's going to just continue the momentum we have in the truck market of leading from an overall share perspective.

The next question comes from Andrew Percoco with Morgan Stanley.

I wanted to start off, Mary, you mentioned in your prepared remarks, everything that you're doing on GM Defense and how that's helping diversify the business. But I did want to double-click on the investments that you guys have made in sodium ion battery storage with Peak Energy and just get a better understanding of what your strategy is and why you chose to go down that path and what that might look like for your business over the next, call it, 18 to 24 months? Just trying to get a better understanding of how you're going to essentially leverage your manufacturing scale, your supply chains to be relevant in the energy storage market. We're obviously seeing some of your competitors do this as well. So just curious to get a better understanding of your thought process around sodium ion and what you see as the commercialization time line there.

Sure. Well, first of all, we think sodium ion batteries are an emerging battery chemistry that is going to be attractive and have advantages over other chemistries from a safety storage perspective. We think that sodium offer could offer lower cost over time than LFP. And as we know, there's an abundance of sodium. There's also a potential for simpler system designs. So we think it's really well suited for grid storage. Also it has strong performance across a wide range of temperatures. And there is potentially lower cooling and maintenance requirements. So again, we think this technology is very promising. We're working with Peak because we think it's going to be the next generation. And when you say a year to 18 months, it's a little further out, but there's real work going on with development milestones and a plan to how we would commercialize -- that we'll share more about over time. But we think Peak is a real opportunity with this technology, and we're going to continue to develop it because, again, there's going to be more and more need. And ultimately, if the technology is promising, it could even find its way into vehicles, which we've got rights to that. So I don't know, Paul, if you have anything you want to add?

Yes. And Andrew, I think this has been obviously a topic across the industry. We've tried to approach it from, first of all, capital discipline as we look at the restructuring that we've done and so on, the idea and we turned down opportunities to put billions of dollars of capital into plants to tool up what is already a highly competitive business based on potential extension of government credits and tax credits, et cetera. I think really what we're looking at here is how do we partner with technology that has synergies to the overall business do it in a capital-efficient manner. And what we found in Peak was the promise of a lot of technology, the ability to scale and something that we think is going to be cost effective, while at the same time, we don't have to invest billions of dollars of capital to do it. So we have a lot of optionality to participate as we choose. So we're optimistic. And in conversations with them, we think that there's a really good growth platform. But we're going to be cautious rather than going all in into a hypercompetitive business.

And I'll just add from a timing perspective, we believe that we'll be building production validate itself on campus in our battery cell development center in the '27, '28 time frame, and we hope to be in production before the end of the decade, which is net far away with all new technology.

Appreciate that. That's great context. And then maybe my second question, just as it relates to -- I know there's obviously a lot of attention on affordability. It doesn't seem to have really had an impact yet on demand for trucks. I know sometimes it takes a while for that to flow through. I'm just curious, as you think about your guidance for the remainder of the year and as obviously, you made some comments about 2027, are you anticipating mix shift more towards crossovers, understanding they're more profitable today than they maybe were 2 years ago. But just curious if you've made any underlying assumptions for that mix shift into maybe smaller, more fuel-efficient vehicles in the back half of the year and into 2027?

Andrew, that's been predicted for several months now, and it's just not happening. We're seeing really strong full-size truck demand and close utility for that matter. We're building everything that we can sell. And -- but to your point, we're going to be guided by the consumer. And I mentioned how we've improved the profitability of our SUVs across the board. So I think we're extremely well positioned from an affordability perspective to meet the customer where we are, but we're just not seeing it. I think if something would have to happen for a long period of time before people would make potentially a different decision. So we're seeing strength even though it's been predicted now for probably about 3 or 4 months.

The next question comes from the line of Itay Michaeli with TD Cowen.

Just a first question just on the updated GM&A pricing environment for the year. Great to see the strength in the first half of the year. Do you think the second half implied pricing does kind of moderate off the first half? I'm curious whether that's kind of reflecting anything you're seeing thus far, like in July or just kind of maybe more of a standard assumption and perhaps a bit of conservatism.

Thanks for the question. I would classify it more as just kind of lapping the prior year pricing actions from where we were. So as we said, going into the year, model year '26, we took some pricing actions, that's got the tailwind. Those have held up strong. The incentive environment has remained fairly consistent. We're not projecting any change to that. It's just the calendar.

Got it. That's helpful. And then the second question, kind of going back to the new trucks into next year, and I appreciate the update on that. You've been asked for on pricing, but I'm curious whether there's also some potential variable cost tailwinds you could enjoy just given the easing emissions standards that maybe allows you to reinvest that back into new content to drive pricing and maybe share at higher trends or even kind of flow that to the bottom line? And maybe if you can comment maybe overall on kind of how to think about the VP per unit, roughly of the new trucks versus the outgoing trucks.

Yes, Itay. So when you look at the sort of current trucks that are being produced, they're already receiving that benefit. So there's not really anything incremental. We're actually driving even more efficiency in the Gen 6 as well. So on a variable profit, it will normalize, and we expect better if -- particularly if we're able to take additional pricing. But it's going to take a little bit time because, as you know, with the ramp-up in the transition, there's some costs that we incur over that time period. So that's why we've classified this as potentially more of a '27 and beyond tailwind than anything material this year even though the trucks will start to hit the showrooms at the end of the year.

The next question comes from Mike Ward with Citigroup.

I want to make sure I'm thinking about this the right way. So if you're talking about digital services, defense, insurance and even putting energy out there, as we look out over the next 5 years, if I'm doing the math right, the financial contribution is going to probably be at or above that you're currently getting from June Financial. Is that the right ballpark?