GM product refreshes are boosting demand, pricing: CFO

General Motors (GM) reported first quarter results that topped analyst estimates on both the top and bottom lines. The automaker also raised its full-year profit outlook.

GM CFO Paul Jacobson tells Yahoo Finance Executive Editor Brian Sozzi the results show that "pricing has held up very strong across the board." Jacobson credits product refreshes with both creating demand and helping to keep pricing on solid footing.

On the topic of EV adoption, Jacobson says it will remain "choppy," though sales are "holding in there pretty well" for GM. Jacobson credits "flexibility" in GM's systems that allows them to do things like produce both EVs and internal combustion engine vehicles on the same production line.

EV rival Tesla (TSLA) plans to make an announcement on its robotaxi on August 8th. GM's autonomous vehicle division, Cruise, has recently put its vehicles back on the road in Phoenix after suspending driverless operations due to safety concerns. "Just because we've paused vehicles on the road doesn't mean we've paused investment in the technology," Jacobsen says, noting the company is focused on safety and rebuilding credibility in the space.

For more expert insight and the latest market action, click here to watch this full episode of Morning Brief.

This post was written by Stephanie Mikulich.

Video transcript

[UPBEAT MUSIC]

BRIAN SOZZI: It's another quarter and another quarter where General Motors really beat Wall Street profit estimates and raised its outlook for the full year. Let's get right to GM CFO Paul Jacobson. Paul, this is becoming a little bit of an old hat with these earnings beats here. I think this report though, really surprised a lot of investors. When going through the numbers, why do you think that upside was driven in terms of profits and sales?

PAUL JACOBSON: Well, thank you, Brian. I appreciate you having us. And it is a great day here at General Motors and I just want to give a great big shout out to the team for delivering another quarter of really, really strong results. When we came into the year, we talked about building in an assumption that pricing was going to be down to 2% to 2 and 1/2%. I think that really reflected a lot of the sentiment that was out there on the street.

But as we've seen in prior quarters, our pricing has held up very strong across the board. We saw average transaction prices essentially flat. And while incentives have ticked a little bit higher, we've actually seen pricing improve April month to date so far. So really a lot of momentum that's fueled by the great products that we're producing and the strong customer demand for them.

BRIAN SOZZI: This is a very important point, I think, on pricing and it's not lost on me throughout the earnings deck, Paul because this is not the story we're hearing from, let's say, traditional or now "legacy" EV makers such like a Tesla. So why do you think your pricing right now is doing or holding up pretty well?

PAUL JACOBSON: Well, you know, we really have a broad portfolio of vehicles that appeals to many customer bases. And when you look at our full-size truck and SUV franchises, they've been really strong. The refreshes that we did a little over a year ago, a couple of years ago have been incredibly strong. And we've seen that. We've been able to pick up share in those segments even while our pricing has been a little bit higher than our competitors. The consistency of that product, I think, is strong.

And now when you look at the Chevrolet Trax, the Buick Envista bringing in portfolios at lower price points. The Trax starts just above $20,000. Sales were up 500% in the quarter from where we were a year ago and that's an improved product that is driving significantly improved profitability for us over the prior model and it's one that customers just love.

BRIAN SOZZI: Since we last saw you on Yahoo Finance, Paul's, earnings about three months ago, we've had financial challenges at EV maker Lucid. Fisker is on the verge of not being around anymore. Tesla stock price is down double digits. I think it's down 42% year to date. Why do you think we're seeing this shakeout in the EV space? And I should note, your stock is up.

PAUL JACOBSON: Well, you know, I think over that time period as we've talked about, EV adoption is going to be choppy. And we've certainly seen slow in the growth rates. But when you look at our retail sales in the first quarter, they were actually up 21% on the EV side. That's despite the fact that the Chevy Bolt, which we're sunsetting the prior generation as we work on the next generation, was down 60% over that same time period.

So retail performance for our EVs is actually-- is actually holding in there pretty well. Now we're scaling up production and we need to make sure that we keep pace with demand and where the customer is. But we feel good about the products that we're bringing to market and offering customers in the EV space capability and performance that they really haven't seen from many competing products.

BRIAN SOZZI: Explain that to investors, Paul. Because you notice-- in the slide deck it's mentioned that you're scaling up the Ultium platform, the battery platform with an acceleration in the back half of the year. But EV prices remain under pressure. Square that for us. Are you still making that bold bet on EVs?

PAUL JACOBSON: Well, look, at the end of the day, we've built the infrastructure and we've put a platform together that allows us to put purpose-built EVs into the market that have better capabilities. So if you look at vehicles like the Silverado EV, for example, 440 miles of range, strong performance in towing, great charging speeds, et cetera.

And we've got many people out there that are performance testing it against our competitors and it really isn't a competition when you look at the capabilities. And that's what you get with purpose-built EVs. And when you combine that with the styling and the function of what we do at General Motors, we think we've got a platform to be able to be successful.

But as we've said before, this EV adoption is going to be choppy. It's going to have its ups and its downs. But we've got a lot of flexibility built into the system. Think about Spring Hill, our plant in Tennessee, where we produce EVs and ICE vehicles on the same production line. So if we see an EV adoption trend higher, we can put more EVs onto that. If we see it take a pause, we can actually produce more ICE vehicles. That flexibility, I think, is really key for us as we built the infrastructure to be successful on this trend over the long term.

BRIAN SOZZI: Nothing gets me excited, Paul, than seeing good old-fashioned GM, Ford duking it out for market share in trucks. Now you note in the slide deck that you saw a 3% point improvement in market share for trucks. Is this you just saying, hey, we're taking market share from the F-150, full stop? I mean, let's be blunt.

PAUL JACOBSON: Well, what I've-- what I'm really proud of is that the team has been able to do it while staying consistent on pricing. Historically in this business, a lot share was traded back and forth with price wars. And when you look at the quality of what we've been able to produce and the demand that we've generated for our vehicles, it's a strong statement as to the engineering quality and the design of what our portfolio is. And incredibly proud of the team.

BRIAN SOZZI: So you won't mention-- you won't say-- you won't say you're taking share from the F-150?

PAUL JACOBSON: [CHUCKLES] I'm not going to say where we're taking share from. I'm just really proud of the vehicles that we're selling.

BRIAN SOZZI: OK, fair enough. On robotaxis, there's a key date coming up in this industry, August 8. That's when Tesla is supposed to unveil something with robotaxis. Does that make you push harder to get Cruze back on the road? I know you're back to manual testing, what, in Phoenix? Is that the event that you think will unlock really a lot of excitement around this space and you move more aggressively with Cruze?

PAUL JACOBSON: Well, I mean we remain very excited about Cruze while we've taken this pause to re-establish credibility with the regulators and with the public. We are proud that we've gotten vehicles back out on the road in Phoenix. And we're going to be guided by safety going forward. But just because we've paused vehicles on the road doesn't mean we've paused investment in the technology. We've been running lots of simulations across the board behind the scenes and the product is really better than ever. So it's going to take us a little bit of time but we want to make sure that we are guided by safety and guided by restoring our credibility in the space. But we're very excited about what Cruze has to offer.

BRIAN SOZZI: I'd love to get your final thought on this one, Paul. So I mentioned earlier, since we last spoke to you, a real shakeout in the EV industry. But when I also last talked to you, there was a real focus on the Fed potentially cutting interest rates. Maybe we get four, five, six rate cuts. That has been completely unwound. And as I sit here today, inflation is still high and maybe there's been some chatter about a rate hike this year, which wasn't even on the cards three-four months ago. As the CFO of GM, I mean, how are you thinking about rates and how might-- if the Fed doesn't move, how do you think that's going to impact your business in the second half?

PAUL JACOBSON: Well, we watch our customers very, very closely in terms of the credit statistics and where demand is. And you know, I think the customer has been really resilient for our products over the last couple of years. This is nothing new from what we've seen with a higher interest rate and I think we've adjusted.

Having GM Financial alongside us is a great asset to have because it allows us to help customers with offers on lease rates, et cetera. So I think we've been able to manage through this. And the customer has been really resilient and that's what's contributed to our strong results. So we're going to continue to be guided by the customer through this and really create a portfolio that meets their needs wherever they are.

BRIAN SOZZI: All right. Well, good luck with that Corvette ZR1 launch. I know a lot of eyes will be on that one indeed. Paul Jacobson, General Motors CFO. Always good to see you. We'll talk to you soon.

PAUL JACOBSON: Thank you, Brian.