General Motors Co (GM) Q4 2020 Earnings Call Transcript

General Motors Co  (NYSE: GM) Q4 2020 earnings call dated Feb. 10, 2021

Corporate Participants:

Rocky Gupta — Vice President of Investor Relations and Treasurer

Mary T. Barra — Chairman and Chief Executive Officer

Paul Jacobson — Executive Vice President and Chief Financial Officer

Daniel E. Berce — Senior Vice President and President and Chief Executive Officer of GM Financial

Analysts:

Rod Lache — Wolfe Research — Analyst

Itay Michaeli — Citigroup — Analyst

Emmanuel Rosner — Deutsche Bank — Analyst

John Murphy — Bank of America — Analyst

Joseph Spak — RBC Capital Markets — Analyst

Adam Jonas — Morgan Stanley — Analyst

Ryan Brinkman — J.P. Morgan — Analyst

Brian Johnson — Barclays — Analyst

Dan Levy — Credit Suisse — Analyst

Philippe Houchois — Jefferies — Analyst

Chris McNally — Evercore ISI — Analyst

Jairam Nathan — Daiwa — Analyst

Presentation:

Operator

Ladies and gentlemen, welcome to the General Motors Company Fourth Quarter 2020 Earnings Conference Call. [Operator Instructions]

I would now like to turn the conference over to Rocky Gupta, Treasurer and Vice President of Investor Relations.

Rocky Gupta — Vice President of Investor Relations and Treasurer

Thanks, Tabitha. Good morning and thank you for joining us as we review GM’s financial results for the fourth quarter and calendar year 2020. Our press results were issued this morning and the conference call materials are available on GM Investor Relations website. We’re also broadcasting this call via webcast.

I’m joined today by Mary Barra, GM’s Chairman and CEO; Paul Jacobson, GM’s Executive Vice President and CFO; and Dan Berce, President and CEO of GM Financial. It’s my pleasure to welcome Paul to his first earnings call with us today, and give Paul a chance to talk about his enthusiasm for our shared vision and accelerating our path forward.

Before we begin, I would like to direct your attention to the forward-looking statements on the first page of the chart set. The content of our call will be governed by this language.

I will now turn the call over to Mary.

Mary T. Barra — Chairman and Chief Executive Officer

Thanks, Rocky and hello, everyone. Thanks for joining. This morning, we shared the details of our strong 2020 financial performance, including Q4 records for EBIT-adjusted, EBIT-adjusted margin, EPS-diluted-adjusted and a record year for GM Financial. These results were driven by the quick actions we took to recover from the early effects of the pandemic.

Looking at the past year, our employees, suppliers and dealers rallied with speed and agility to support our customers and our communities, as well as protecting the business. The pandemic has been a catalyst for finding new and better ways to work, while strengthening our resolve to win. As some of our plants suspended production in the early days, our teams rapidly turned to producing critical care ventilators and personal protective equipment for patients and front-line healthcare workers. After our first conversation with Ventec Life Systems, we began production in just 30 days and we built 30,000 ventilators in 154 days. And with that same speed, we developed rigorous safety protocols so we could restart our operations around the globe. This collective spirit was inspiring, and it still drives us and it’s contributing to the greatest era of transformation in the history of our Company.

In spite of the pandemic, we accelerated mission-critical businesses like our EV and AV initiatives. We maximized production of full-size trucks and we launched our new family of full-size SUVs safely and on time. We’ll sustain this culture of innovation and leadership in 2021 and beyond and that is my focus this morning. We are fully committed to a capital allocation strategy that invests in new and existing businesses to drive growth. We’re going to generate that growth through our EV portfolio as well as businesses like BrightDrop, OnStar Insurance Services, subscription services like Super Cruise and OnStar Guardian, and much more to come from our growth and innovation team. The semiconductor shortage won’t slow our growth plans and with our mitigation strategies, we still expect a very good year for General Motors, and Paul will share additional details in his remarks.

We have strong underlying performance and very strong momentum with customers. Last year, for example, we posted our largest year-over-year US market share gain since 1990, led by full-size trucks and SUVs. In 2020, GM was the full-size pickup sales leader in the United States thanks to gains by the Chevrolet Silverado and record GMC Sierra deliveries, and we plan to expand our capacity in early 2022. The new Cadillac Escalade, GMC Yukon, and Chevrolet Tahoe and Suburban are leading the full-size SUV market. And GM China rode the increasing market preference for large MPVs and luxury vehicles to year-over-year sales increases in these segments, including record deliveries for Cadillac.

As we look to the future, we are well-positioned from a policy standpoint. I, personally, and members of our senior leadership team have had discussions with President Biden, Vice President Harris and several key Cabinet appointees. The Biden administration is increasingly aligned around the importance of domestic manufacturing and the need for widespread adoption of EVs. We look forward to working with the administration on policies that support safer transportation with zero emissions.

When you look at the strategy we have shared, it should be clear. We will seize every opportunity to drive growth, expand our markets and enter new ones. Our Ultium platform is core to these initiatives. It is the foundation for our upcoming global family of EVs. With our first-generation Ultium platform, we will now see a 40% battery cost reduction compared to today’s Chevrolet Bolt EV, and we’re already working on the next generation of Ultium battery technology, which will deliver a 60% improvement over Bolt EV with double the energy density. To do this work, we’ve hired almost half of the 3,000 expected new tech employees across engineering design and IT, and we expect to finish hiring by the end of the quarter. What is especially exciting to me is that our vision and our commitments and our aspirations are attracting incredibly talented people to GM. They believe in what we are doing, and when they arrive they’re finding like-minded colleagues already hard at work.

Since we first introduce our growth strategy and related announcements in November, we have shared even more of the aggressive steps we are taking to accelerate our plan. We have committed to increasing our EV and AV investments to $27 billion from 2020 through 2025, including more than $7 billion this year alone. With this investment, we will launch 30 EVs globally and achieve EV market leadership in North America. In addition, by mid-decade we plan to sell at least 1 million EVs per year in our two largest markets in North America and with our joint venture partners in China.

During CES in January, we revealed a new GM brand identity that honors our past but signals our future. We also introduced a new safety brand, Periscope. It describes how we will advance toward a world with zero crashes by integrating vehicle technology, research and advocacy. And we launched a new brand campaign called Everybody In, which is our call to action to get everyone in an EV. Everybody In is a powerful idea because we must all be all in to achieve our goals. We’ll offer EVs across all of our brands and at price points, and span the global EV market from the Wuling Hong Guang Mini to the Cadillac CELESTIQ. As for the GMC Hummer EV, we have prototypes on the road right now, and they are undergoing cold weather testing in Michigan’s Upper Peninsula, then they will head to Yuma, Arizona and to the toughest off-road trails in Moab, Utah.

In the meantime, VIN 001 is already spoken for. As part of GMC’s partnership with the Tunnel to Towers Foundation, the first GMC Hummer EV will be auctioned on March 27. All proceeds will go to assisting the families of fallen and disabled soldiers and first responders. We envision a future where there is an EV offering for everyone. Our future will be inclusive and comprehensive, and it will create new businesses and in some cases, new brands.

BrightDrop is a powerful example. It is a new commercial EV business that targets delivery and logistics providers, particularly those in the parcel and food delivery industries, with innovative zero-emissions solutions. From a revenue standpoint, we’ll provide vehicles like an EV600 Van, which is a substantial opportunity in and of itself because the global market for light commercial vehicles is almost 9 million units today according to IHS Markit, and we believe demand for electric light commercial vehicles will grow quickly. The market seems to agree. In fact, third-party research estimates that the addressable market for eLCVs could be $30 billion by 2025 and double that in 2030.

BrightDrop also allows us to create new sources of value for our customers beyond the vehicle, driving diverse income streams from a full ecosystem of product and services. FedEx Express is slated to receive the first EV600s later this year. The EV600s will help them meet their stated fuel efficiency goals as part of their broader sustainability strategy and electrification efforts. FedEx Express has also conducted a pilot with the BrightDrop EP1 electric pallet product and has another one planned. In this first pilot, the EP1 demonstrated significant productivity increases in the delivery process. Similarly, Merchants Fleet, which has more than 150,000 vehicles under management, is targeting to have 50% of its mobile fleet electric by 2025 and 50% of its managed clients fleet by 2030, and is moving forward with plans to put 12,600 BrightDrop EV600s into service.

Another exciting and potentially lucrative source of growth for — is our Hydrotec Fuel Cell technology. Like BrightDrop, Hydrotec is proof that General Motors vision of a world with zero emissions isn’t limited to passenger vehicles. Less than two weeks ago, Navistar, GM and OneH2 announced a zero emissions long-haul transportation ecosystem that will launch in 2024. Navistar will begin building Class 8 trucks for its launch customers, GM will supply Hydrotec Fuel Cells, and OneH2 will supply the hydrogen-fueling infrastructure. It’s an exciting way for us to partner in the Class 8 segment, a nearly $30 billion market in the US alone and that — one that we haven’t seen before. And we believe this is just the beginning for Hydrotec. This is a nascent multi-billion-dollar hydrogen power industry for trucking, for military, aerospace and stationary power applications that we are targeting directly, as well as through GM Defense.

Customers and shareholders will continue to see even more evidence throughout 2021 that we’re executing our vision and plans for growth. One great example is right around the corner. On Sunday, GM will unveil the 2022 Bolt EUV, which arrives this summer and will be built in Orion, Michigan. The all-new Bolt EUV and refresh Bolt EV feature unique exterior designs and new interiors. The Bolt EUV will provide nearly three inches more legroom than the Bolt EV, and will have available wireless phone charging and wireless Apple CarPlay and Android Auto allowing customers to easily access their music and podcasts. Like the original Bolt EV, the new Bolt EUV and refresh Bolt EV will build on Chevy’s commitment to attainable EVs. The Chevrolet Bolt EUV is the first Chevrolet and the first GM EV to offer Super Cruise technology, one of the 22 GM vehicles that will offer Super Cruise by 2023.

Based on feedback from Cadillac customers, we’re confident that we will build a steady stream of subscription revenue because our customers don’t want to drive without it. In addition, GM Cruise and Microsoft will increasingly leverage Azure, Microsoft’s Cloud and Edge computing platform, to help commercialize self-driving vehicles at scale. And with new investment by GM, Microsoft, Honda and other institutional investors, the estimated valuation of Cruise now stands at $30 billion. And just yesterday, the California DMV released the 2020 disengagement data for autonomous vehicles, and we are very pleased with the excellent continuing improvement and leadership shown by Cruise.

This fall, we’ll begin building the GMC Hummer EV at our Factory ZERO in Detroit-Hamtramck. Work on our flagship EV plant is on track and we cannot wait to start shipping vehicles to customers. Among its many advanced manufacturing capabilities, Factory ZERO will be the first US auto plant equipped with 5G fixed mobile network technology. As we said in November, our $27 billion in EV and AV investments will include additional EV assembly and battery capability beyond what we’ve announced for Factory ZERO, Spring Hill in Tennessee, and our Ultium Cells JV plant in Ohio where hiring is already underway. In fact, employees will build prototypes later this year. Along the way, OnStar Insurance Services is on target to expand to all 50 states by the end of the year.

What’s happening inside our Company and behind the scenes is also important to our success. Delivering this exciting new chapter for GM requires a special team that values diversity and inclusion, a safe workplace and the commitment to create a better, safer and more sustainable world. We aspire to be the most inclusive company in the world because it’s the right thing to do and because diversity and inclusion are the foundation of a winning culture. I am deeply and personally engaged in this part of our strategy. Our strong values are a compelling tailwind for GM. They will drive creativity, agility and so much more for our future.

This future also inspires us to do even more to help mitigate the efforts of climate change, and we will. Less than two weeks ago, we announced plans to become carbon-neutral in our global products and operations by 2040. We will set science-based targets to achieve carbon neutrality and we aspire to eliminate tailpipe emissions from new light-duty vehicles globally by 2035. We will source 100% renewable energy to power our global sites by 2035, five years earlier than we announced just a year ago. And we have signed the Business Ambition Pledge for a 1.5 degrees Celsius, a call to action from a global coalition of UN agencies, business and industry leaders. Like everything else we do, we will provide updates on our progress and we will hold ourselves accountable.

And now I’d like to turn the call over to Paul.

Paul Jacobson — Executive Vice President and Chief Financial Officer

Thanks, Mary, and good morning, everyone. Before I get into the results, I want to take a quick minute to thank Mary, the broader executive team and really the entire organization for the warm welcome that I’ve received in my time so far here at GM. I’m really excited for the opportunities that we have ahead of us, as we build appreciation for the innovation that we are championing right now.

Whether it’s in EV/AV connected services or our overarching vision of zero crashes, zero emissions and zero congestion, we are executing well on our growth strategy and accelerating these opportunities with an emphasis on investing in new businesses, while maintaining a strong investment-grade balance sheet. We believe we can take advantage of these once-in-a-generation opportunities to achieve strong profitable growth with a solid return on investment. Being a part of GM as it writes the next chapters of its history is a huge honor for me. I look forward to continuing the conversations I’ve had with the investment community thus far, and getting to know those of you I have not yet had the chance to meet.

Now, let’s get into the results. While 2020 was adversely impacted by production challenges experienced in the first half of the year, we demonstrated resilience and flexibility as we quickly moved to preserve liquidity and manage inventory, while still launching an all-new lineup of our highly profitable full-size SUVs and prioritizing investments in our all-electric future. Even in the face of the pandemic, we generated results of $122.5 billion in net revenue, $9.7 billion in EBIT-adjusted, 7.9% margins, $4.90 in EPS-diluted-adjusted and $2.6 billion in adjusted automotive free cash flow in 2020.

In the fourth quarter, we continue to see strength demand as we generated $3.7 billion in EBIT-adjusted, including the $1.1 billion charge for Takata. We far exceeded the top-end of the scenario shared on our Q3 earnings call, absent the impact of Takata, due to strong performance in North America and GM Financial in particular. We also drove strong Q4 net revenue of $37.5 billion, approximately 10% EBIT-adjusted margins and $1.93 in EPS-diluted-adjusted and $3.4 billion in adjusted automotive free cash flow. The Q4 $1.93 EPS-diluted-adjusted includes a negative impact of $0.59 from the Takata airbag-inflator recall and a $0.26 gain from investments in PSA and Lordstown Motor Corporation. In Q4, we fully repaid the remaining balance on our corporate revolver draw, and ended the year with strong automotive cash balance of $22.3 billion and total automotive liquidity of more than $40 billion.

Let’s take a closer look at North America. In the calendar year, North America delivered EBIT-adjusted of $9.1 billion, up $900 million year-over-year and a 9.4% margin. In Q4, North America delivered EBIT-adjusted of $2.6 billion, up $2.3 billion year-over-year as we moved past the effect of the 2019 strike. Continued performance from the launch of our all-new full-size SUVs and disciplined pricing on our full-size pickup trucks offset the impact of the Takata recall. US retail sales have continued to recover with Q4 GM results up 12% year-over-year despite limited inventories, closing the year strong with December retail sales up over 19% year-over-year. We have seen this strong performance continue into January with sales up 9% year-over-year. Additionally, US retail market share gains have been solid, up 1.4 percentage points year-over-year in Q4, exceeding 18% market share driven by the newly launched full-size SUVs and high demand for large pickup trucks.

And we are looking forward to retail EV growth, where we are seeing encouraging signs for demand. We’re really excited about the launch of the GMC Hummer EV this fall. When we revealed that in Q4, it was the most watched auto review in history with 1.3 billion impressions and 370 million views, and it created the highest website traffic of any GM model ever. We wanted to kick off GM’s acceleration towards EVs with something as exciting as the GMC Hummer EV, a vehicle that we are very proud of. And it’s just the beginning as we rollout 30 new EVs globally by 2025 with several high-volume entries in North America by 2023.

Let’s move to GM International. Full year EBIT-adjusted in GMI was a loss of $500 million, down $300 million year-over-year due to the effects of the pandemic on operations particularly in China, partially offset by performance improvement outside of China. For the fourth quarter, we were encouraged by our progress with EBIT-adjusted of $300 million, up $100 million year-over-year due to positive price mix and benefits from our cost actions, partially offset by weaker FX in South America. We delivered $500 million of equity income in China for the calendar year, including $200 million in Q4, in line with our expectations. As we progress through the year following Q1 lows, we saw market recovery and benefits from our launches and cost actions, returning to the approximately $200 million quarterly equity income run rate in Q2 through Q4. We received $500 million in dividends from our China automotive JVs in Q4, bringing total dividends to $1 billion for the year.

Just a few comments on GM Financial, Cruise and our Corp segment before we turn to 2021. GM Financial posted revenue of $13.8 billion for the year and record EBT-adjusted of $2.7 billion. In the fourth quarter, GM Financial generated revenue of $3.4 billion and EBT-adjusted of $1 billion, a Q4 record, up $500 million year-over-year due to strong used-vehicle prices contributing to gains on sale of off-lease vehicles, improved credit performance and lower interest expense due to declining interest rates.

Cruise costs for the year and in the quarter were $900 million and $300 million respectively. 2020 was a huge year for Cruise. After substantial development and testing, Cruise has now reached a point where it has removed the human driver from behind the wheel and is now fully testing driverless cars on the streets of San Francisco successfully, as Mary noted earlier. We expect many more good things to come for Cruise in 2021. Cruise segment spend is projected to be about $1 billion in ’21. Corp segment costs were $600 million for the year and better in the fourth quarter than the normal run rate of $1 billion due to investment gains. We expect the underlying spend in the Corp segment to be about $1.2 billion in 2021, an increase over our normal run rate as we are accounting for certain growth initiatives in the Corp segment.

In late 2018, we made a strategic decision to accelerate our transformation for the future to strengthen our core business, capitalize on the future of personal mobility and drive significant cost efficiencies. Our plan included a path to achieve $4 billion to $4.5 billion in cost savings through 2020. I’m pleased to report that we have achieved $4.5 billion in savings since 2018, including $200 million in Q4 and inclusive of $200 million of savings related to the wind-down of holding and sale of our Thailand business. Having the right cost structure that aligns with our strategy is a key focus for us. We’ve made great progress with the actions taken over the past several years and we will continue to pursue incremental efficiencies.

Now, let’s turn to the 2021 outlook for the calendar year. As we enter 2021, we see ongoing industry recovery and strong demand for our most profitable products. The underlying business has never been more robust. I want to provide some macro context around 2021 to help set the stage. With continued recovery of the US light vehicle industry in ’21, we expect SAAR to be in the mid-16 million unit range with a stronger second half as we experienced normal seasonality in Q1, and expect to see an inflection point in the spring as vaccination rates increase and warmer weather lifts consumer sentiment in auto demand. In China, we expect the industry to grow year-over-year as the economy continues to recover. However, we expect a continued competitive pricing environment with increased environmental compliance costs. In South America, we expect continued commercial and portfolio strength to more than offset the macro headwinds. Finally, we expect commodity prices to be a significant headwind as platinum group metals and steel prices have seen major increases in recent weeks and months.

Our underlying 2021 performance is expected to be strong, including EBIT-adjusted in the $10 billion to $11 billion range, as the fundamental business is robust and we will offset significant commodity headwinds while increasing investments to support our growth strategy. And EPS-diluted-adjusted in the range of $4.50 to $5.25.

As Mary mentioned at the outset of this call, the industry-wide semiconductor supply shortage will also impact us this year as it does many other industries. Included in the guidance I just provided is an estimated $1.5 billion to $2 billion in EBIT-adjusted full year impact driven by loss contribution margin, partially offset by mitigation efforts through cost and go-to-market actions. We expect the shortage to be temporary and we’ll look to focus on protecting supply of our highest-demand products such as full-size trucks and SUVs as well as EVs.

Importantly, we do not believe this short-term headwind will affect our long-term earnings power, and we remain committed to our growth initiatives and the EV acceleration we have previously communicated. From an adjusted automotive free cash flow perspective, we estimate a 2021 impact from the semiconductor shortage in the $1.5 billion to $2.5 billion range, putting 2021 adjusted automotive free cash flow guidance in the range of $1 billion to $2 billion.

We announced the extension of downtime at Fairfax, CAMI and San Luis Potosi yesterday, which is included in our numbers above. Our intent is to make up as much production loss at these plants in the second half of the year as possible. We expect 2021 capex to be in the $9 billion to $10 billion range, which includes approximately $2 billion of deferred capex from 2020, as well as accelerated investments in our all-electric future. Also included in our guidance is cash outflow from the Takata recall, which we expect to occur over the next two years to three years from the expense we took in fourth quarter.

Non-operating items included in our guidance worth mentioning include higher year-over-year net interest expense and an expected tax rate of approximately 24%, which is higher primarily from the tax deconsolidation of Cruise. Regarding earnings results cadence, we expect second half to be stronger than the first half primarily as a result of some of the production downtime we will take in certain plans to manage the semiconductor supply shortages.

Finally, I want to spend a minute on capital allocation. The top priority for us is to invest in both new and existing businesses, including previously-announced investments to accelerate EV and AV growth, while reducing complexity and leveraging current architectures across the ICE portfolio to drive better productivity and customer response which will help fund investments in our future. To support this growth strategy in 2021, we will spend more capital on EV and AV product programs than on gasoline-powered and diesel-powered development for the first time in our history.

Our capital allocation plan includes more than $6 billion spending on EV and $1 billion on AV in 2021, and we will fund key growth initiatives such as BrightDrop, OnStar Insurance Services, subscription services like Super Cruise and OnStar Guardian aimed at accessing new addressable markets that we have never tapped before, representing a significant top-line growth opportunity. We will fund these growth investments with internally-generated cash while maintaining our investment-grade balance sheet.

In summary, we had a strong finish to the year highlighting the underlying strength of our business. We have again demonstrated our strength, flexibility, laser-focus on execution and ability to manage through a significant disruption while still generating strong results. This focus will continue in ’21 as we manage the challenges of the industry-wide semiconductor shortage, while continuing to launch new and exciting products and services and position to GM — position GM to win in the future of mobility. And I’m proud to be a part of this team.

This concludes our opening comments and we’ll now move to the Q&A portion of the call.

Questions and Answers:

Operator

[Operator Instructions] Our first question comes from the line of Rod Lache with Wolfe Research.

Rod Lache — Wolfe Research — Analyst

Good morning, everybody. Congratulations on the performance. I actually had two longer-term questions I wanted to ask you. One is you alluded that some of the growth initiatives could result in new brands like BrightDrop, but noticed that BrightDrop is continuing to use the independent dealer model. Obviously, independent dealers make some money, they do cleave off some gross margin and F&I per vehicle, which some of the new entrants are suggesting is kind of a disadvantage for existing players. I’m wondering if there are changes to the way that BrightDrop is — the franchise agreements work that kind of levels the playing field with new entrants.

Mary T. Barra — Chairman and Chief Executive Officer

So, Rod, just in general, we see our dealers as a huge asset to the Company. They have — they are responsible for partnering with us to deliver industry-leading sales and service. And so of course as the industry transforms, as the customer expects different things both retail and fleet from a BrightDrop perspective, we know and we are working with our dealers and their transforming as well. And they’re especially — there is a huge percentage of our dealers that are very excited about the EV transformation and the opportunity.

And we’ve been working, and frankly, it accelerated last year during the pandemic, of ways that we can better support the customer, meet them where they want to be and take cost out of both of our business to improve both. So that’s the journey that we’re on. I’m not going to — for competitive reasons I’m not sharing all of the specific changes and transformation activities that we’re doing but they’re pretty substantial and like I said, our dealers are very much engaged and excited about that.

Rod Lache — Wolfe Research — Analyst

Okay, thank you. And then just secondly, you mentioned subscription services and actually one of your slides mentions that your next-generation electronic architecture is going to be available on 29 different models by 2023. It sounds like you think that the vehicles that you sell have the potential to become platforms for deploying services and features that you could charge for. So, I was hoping you can maybe give us a little bit more insight into the potential there? It sounds like Super Cruise is one of these things, but what is the sort of projected population of vehicles that you’re going to be targeting? What are the kinds of subscriptions that you think you might be able to generate?

Mary T. Barra — Chairman and Chief Executive Officer

So, Rod, we’re very excited about the opportunity we have to present services as — especially as we now have the Vehicle Intelligence Platform, which is our new electrical architecture underpinning the entire vehicle and it protects the vehicle from a from a cyber, a safety perspective, as well as gives us tremendous over-the-air updates and the ability to do — provide services on demand.

You mentioned Super Cruise. That is one that will have the ability to do. There’s several other opportunities that we’re exploring and, frankly, working on right now. Again, we haven’t announced many of them publicly, but I will tell you we have a whole team across our sales and marketing team partnering with our engineering team and software engineers. So, you’ll hear more about this as we go forward, but we think it’s going to be a huge growth opportunity for us.

Rod Lache — Wolfe Research — Analyst

Okay. All right, thank you.

Operator

Your next question comes from the line of Itay Michaeli with Citi.

Itay Michaeli — Citigroup — Analyst

Great, thanks. Good morning, everyone.

Mary T. Barra — Chairman and Chief Executive Officer

Good morning.

Paul Jacobson — Executive Vice President and Chief Financial Officer

Good morning.

Itay Michaeli — Citigroup — Analyst

Just had one financial and one strategic question. On the financial questions, hoping you could quantify for the 2021 bridge just a raw material impact that you’re expecting, as well just a volume impact embedded in the estimates for the semiconductor shortage.

Paul Jacobson — Executive Vice President and Chief Financial Officer

Sure. So for the commodities first, we’ve seen about 120% increase in steel and PGM prices over the last — really kind of since May of last year. That’s a couple of billion dollars, I would say, that we’re making some strides to offset that and we’re going to continue to target where we can in order to drive savings to help offset that. But that’s rough order of magnitude what we’ve included in our numbers, and of course there is always some lag in terms of being able to respond to those prices.

On the volume side, I would say that we — these numbers are moving around rapidly. And between building vehicles that we will go back and retrofit with the components later in the second half and managing through second-half makeup volumes, it’s premature to talk about the volumes at this point in time. But that’s where we’ve come up with a $1.5 billion to $2 billion net of the initiatives that we think we can bring together to help offset through this.

Itay Michaeli — Citigroup — Analyst

Great. That’s very helpful, Paul. And then on the strategic question, wanted to focus on the AV part of the story. Really kind of two parts to the question, the first on Cruise, just given the progress we’re seeing in the California reports. I was hoping you’d update us on the latest thinking from yourselves and the Cruise team around when Cruise deploys, do you compete against ride-share networks, or do you partner with them or both? I’d just love some updated thoughts there.

And then on the kind of AV investments inside of GM, it sounds like you’re accelerating that as well. I was hoping perhaps, Mary, you could talk about the plan around the zero crash vision. How do we think about AV deployment within the GM vehicles, let’s say, over the next five years and what kind of path should we expect there?

Mary T. Barra — Chairman and Chief Executive Officer

Sure, Itay and thanks for the question. I’m really excited, because if you look at the fact that we’re going to be putting Super Cruise on multiple vehicles and the strong customer reaction we’ve gotten from them and that continues to grow and definitely contributes to a safer world, a zero crashes world. And we’ve talked about the next generation of Super Cruise and that will have even more capability that we’ll be able to provide to vehicles and in some cases, launch and provide additional functionality over-the-air, so that’s something that will be quite significant by 2025.

Then when you look at Cruise, they continue to hit their milestones, they’re on track from a safety perspective because we’ve always said safety will be our overriding priority. They’re also working on making sure the ride is enjoyable from a customer perspective, and again they’re making progress. I’m very enthused. You know that they’re testing right now in San Francisco without drivers in the vehicle in certain situations. I’m not going to put a specific time frame on when we’ll launch commercially, but the progress we’re making puts us in a very good place that that’s not years away like people think or have talked about it.

From — are we going to partner with existing rideshares? We have the ability to go and launch our own service. We already have our own application that is being leveraged by our employees right now. So, we have — I think when we are in a position that we can take the driver out of the vehicle from a — and launch the business commercially, we’ll have many opportunities and we’ll do what’s going to drive the biggest value from a shareholder perspective. But I think at that point, you can think of it like a platform.

Itay Michaeli — Citigroup — Analyst

Terrific. Got it. That’s very helpful. Thank you.

Operator

Your next question comes from the line of Emmanuel Rosner with Deutsche Bank.

Emmanuel Rosner — Deutsche Bank — Analyst

Hi, good morning, everybody.

Mary T. Barra — Chairman and Chief Executive Officer

Good morning.

Paul Jacobson — Executive Vice President and Chief Financial Officer

Good morning.

Emmanuel Rosner — Deutsche Bank — Analyst

First, a financial question and then a longer-term one as well. So on the financial side, it seems like there was a very strong price mix, very strong volume contribution in North America, but then at the same time I think that there was a bit of a cost headwind, even excluding the airbag recall, and I think your slides talk about some warranty and materials performance. And so I wanted to see if you could give a little bit more detail around what happened specifically in North American cost in the quarter and how do you think about it in your bridge to 2021?

Paul Jacobson — Executive Vice President and Chief Financial Officer

Hey, Emmanuel, good morning. It’s Paul. You mentioned the biggest one obviously was Takata in there, but I would say the other two were primarily really related to content and major materials. So, we’ve taken a conscious effort in the new line of full-size SUVs to improve contact — content, and you’re seeing that in the pricing offsets and what we’re able to get in the market. These are content improvements that consumers really love and they’re willing to pay for and we feel good about that. And then there is a little slug of commodity pressure that we saw in the fourth quarter, probably about 60/40 between materials and commodities of that remaining piece.

Emmanuel Rosner — Deutsche Bank — Analyst

And just on this, so thinking about 2021, is it fair to then assume continued pressure, I guess, from the materials costs excluding commodities, the content cost?

Paul Jacobson — Executive Vice President and Chief Financial Officer

Yeah, I would say that content is a good reflection of where we’re heading, especially in terms of the volume of full-size SUVs and trucks.

Emmanuel Rosner — Deutsche Bank — Analyst

Okay, great. And I guess on the electrification side are looking a bit longer-term. Now, you have a few very strong milestones that you’ve put out there, more than a million units of EV by 2025 and then obviously 100%, I guess, by 2035, and then several high volumes in North America by 2023. Can you give us sort of a holistic view of how you — since we get deployed, what sort of segment or timeline can we expect — when can we learn more from General Motors around the bridge to get you to this million units by 2025 and to get you to the 100% by 2035, what models will make this happen and on what timeline?

Mary T. Barra — Chairman and Chief Executive Officer

Sure, Emmanuel. Well, I think we’re really excited. We’re launching the Chevrolet Bolt EUV and next generation Bolt EV this week, and so that starts I think a very positive momentum, especially when you look at the affordability of the Bolt and the Bolt — Bolt EV and the Bolt EUV. Later this year, we’ll have the GMC Hummer. Early next year, we’ll have the Cadillac CELESTIQ. We’ve also announced the Cadillac — or excuse me, the Cadillac LYRIQ, and then we’ll have — we’ve already shared the Cadillac CELESTIQ, which is really a flagship. And you’ll just see a steady launch of vehicles because we’ve said two-thirds of the 30 by ’25 will be in the United States. You’ll hear more about which vehicles are coming in what order as we start to move through the year, but I would say as you then — so that — and from competitive reasons we’re not going to share too much, but we’ll continue to share more as we get closer to these launches as we go through this year and next.

When you start to look at 2035 — right now we’re a full-line manufacturer, and so we will cover the full line and more when you think about products like BrightDrop and then our first-mile-last-mile. You put on top of that the services that will be available through the vehicle that we’ve talked about, subscription service, and then you put things like insurance that we think we can do very well with the learnings we have from our connected vehicle. So it will be a full line broader than we have right now and that’s all enabled by the Ultium platform. And we intend to take share and grow overall as we do this with the number of vehicles sold, as well as the growth opportunities that sit on top from a services and other businesses perspective.

Emmanuel Rosner — Deutsche Bank — Analyst

Great, thank you.

Operator

Your next question comes from the line of John Murphy with Bank of America.

John Murphy — Bank of America — Analyst

Good morning, guys. Mary, I just wanted to ask a question. I mean, you’re really accelerating the advancement of your EV and AV technology much faster than people would have thought not too long ago, but there is the risk of creating some obsolescence around your core ICE products and it seems like we’re going to reach this tipping point in the next few years. So just kind of trying to understand — I mean, a pessimist might say hey, you’re going to blow up your residuals and you’re going to have a real problem. An optimist might say you’re going to create a real super cycle for demand. So just curious how you’re thinking about that and how you might manage that?

Mary T. Barra — Chairman and Chief Executive Officer

Well, John, it’s an excellent question and I definitely think it presents a super cycle opportunity for us. When you look at our ICE business and the platforms we invested in over the last five years, we’re well-positioned and that’s what puts us in a place where we can be investing more in EV and AV than we are in ICE. And so we’re going to leverage the platforms that we already have, the strong franchises in full-size trucks, full-size SUVs, mid-size, crossovers. And I’m also super excited about products like the Chevrolet Trailblazer and the Encore.

So, we have a really strong portfolio of products as we make this transition that’s going to need limited investment. And then we’re demonstrating right now, we also have a very capable manufacturing team, manufacturing workforce. We’re transitioning the Detroit-Hamtramck plant right now, Factory ZERO, to build electric vehicles, we’ve also announced Spring Hill. So, we have a very well thought-through plan of how we will transition our manufacturing facilities to electric vehicles. We can do it in a pretty short time frame and with the shorter vehicle development process we have for EVs, those two go hand in hand.

And in some cases, investment that we’re making to increase our ICE vehicles, we’re doing that with a mind for what it will take to then have a quicker, less expensive conversion to EVs. So it’s a very well-integrated plan. We’ll be customer-driven, but we’re working hard to create a delightful EV ownership experience with the right range, the right charging, the services on top of it and the connectivity that we think we can grow as we make this transition and not have stranded assets.

John Murphy — Bank of America — Analyst

Okay, that’s incredibly helpful. And then just a second question around the chip shortage. I mean, when we saw production disruptions and supply shortages last year, what it really resulted in was very — obviously tight inventory, but very, very strong mix and a focus on your more highly profitable vehicles. I’m just curious as you go through this process of working through the chip shortage, hopefully be done sometime later this year, how you reallocate these chips to vehicles, how much fungibility there is. And could we be in another environment were mix just remains incredibly strong and offsets some of this potential weakness in production volume, and just how much of that is kind of encompassed in this $1.5 billion to $2 billion EBIT hit you’re talking about to the chip shortage?

Paul Jacobson — Executive Vice President and Chief Financial Officer

Hi, John, good morning. It’s Paul. The — what I would say is that obviously the situation is very fluid and you’ve seen that from various manufacturers across the board. And what I would say is we’re adapting to kind of focus production on two things. Number 1, those vehicles that have higher margins and provides better contribution for us. But also with the full-size SUVs and the trucks, they are already operating at full capacity and projected to pretty much for the entire year, so the makeup volume in the back half of the year is harder. So where we are taking chips from are vehicles where we either have a little bit of more inventory or more importantly, we’ve got production gaps in the back half of the year or capacity to be able to make that up. So it’s very fluid as we’re managing through this, but that’s all baked into the numbers that we gave earlier.

John Murphy — Bank of America — Analyst

And then just one little quick housekeeping on the dividend. It sounds like the growth investment, capex, R&D, everything you do is going to crowd out the dividend for a little while. Is that a fair statement or will it be a rethinking around the dividend sometime this year?

Mary T. Barra — Chairman and Chief Executive Officer

So, we talked — at the end of Q3, we talked about having a dividend that’s the right size and at the right time. We continue to be dedicated to that but we are very much focusing on the first pillar of our capital allocation strategy, which is to invest in growth businesses. So, you’ll hear more from us later this year as it relates to the dividend, but I think the focus that we have on growth and what we’re investing in growth is going to provide a really strong return for our shareholders.

John Murphy — Bank of America — Analyst

Sounds good. Thank you very much.

Operator

Your next question comes from the line of Joseph Spak with RBC Capital Markets.

Joseph Spak — RBC Capital Markets — Analyst

Good morning, everyone.

Mary T. Barra — Chairman and Chief Executive Officer

Good morning.

Joseph Spak — RBC Capital Markets — Analyst

The — just the first question on the chip shortage. I was wondering if you could help us think through maybe some of the cash flow and working capital timing impact. I know you gave the impact that’s included in the guidance, but it would seem like some of the strategies you’re employing, it might be a little bit more of a working capital drain in the first half relative to the EBIT impact and then maybe a recovery in the back half. Is that correct?

Paul Jacobson — Executive Vice President and Chief Financial Officer

Hey, Joe. It’s Paul. Good morning. I think that’s an accurate assessment. I mean, we do expect some choppiness in the near-term as we’re altering production, managing through this, as well as — you mentioned if we’re building vehicles and then coming back to retrofit them. So, we do see a bigger working capital in EBIT impact in the first half of the year, and then the expectation is that we’ll be able to make up for that in the second half.

Also incorporated into our numbers are cash impact guide, if you noticed, was a little bit wider than our EBIT guide. That’s due in part to we were planning, going into the year, on having a little bit of a build in inventory levels benefiting working capital that as we make up production volumes in the second half, depending on how the semiconductor situation works itself out, we could see a year-end where inventories are flat or — and not have that working capital benefit that we might otherwise see, which is why we put a little bit more cash impact into it.

Joseph Spak — RBC Capital Markets — Analyst

Thanks for that. And then second question is — and Paul, welcome to GM. But — and I guess I just want to get your sort of view here as someone that’s looking at General Motors with some relatively fresh eyes and, I think, somewhat of a reputation as being a creative thinker and ability to help realize value. As you look at GM’s assets and balance sheets, how do you think about unlocking further value and what do you see as the opportunities that may be underappreciated by the market?

Paul Jacobson — Executive Vice President and Chief Financial Officer

Well, first of all, thanks for that welcome, Joe, and I’m not sure who you were talking to but I appreciate it, nonetheless. What I would say is that there is tremendous opportunity here to help the market understand that we’re really transitioning from what I would say has been historically kind of an old-school industrial type mindset for the market, to a real technologically-savvy growth-oriented company that’s really going into a lot of new markets.

And as we see those continue to develop and we continue to ratchet success stories like Cruise and what I believe BrightDrop will be, as well as the EV portfolio, I think there’s a lot of opportunity here to drive value for our shareholders. And that’s ultimately what sold me on coming here to join Mary and the team.

Joseph Spak — RBC Capital Markets — Analyst

Thank you.

Operator

Your next question comes from the line of Adam Jonas with Morgan Stanley.

Adam Jonas — Morgan Stanley — Analyst

Can you hear me?

Mary T. Barra — Chairman and Chief Executive Officer

Yeah, we can hear you, Adam.

Paul Jacobson — Executive Vice President and Chief Financial Officer

Adam, we can hear you now.

Adam Jonas — Morgan Stanley — Analyst

Great, okay. I was going to ask Mary why she hates Norway so much but in the interest of time, we’ll move on. Look, I’m not worried about the — I’m not worried about the chip shortage, Mary. I’m worried about the battery shortage. What we’re seeing is in the next few quarters or couple of years, the potential for a real serious supply demand imbalance on EV cells. Now fortunately, you’re pretty close to the bread truck and you’ve used your vision to get — to kind of secure, on a relative basis, a lot better supply domestically and otherwise, but this seems like a real problem.

I’m curious, Mary, at a high level whether you and the team, based on what you see all the way up to the mines in the surface of the earth with the metals, do you see a risk of a cell supply constraint that could really impact volume for the broader EV industry over the next couple of years at this point? And then I have a follow-up.

Mary T. Barra — Chairman and Chief Executive Officer

Adam, well, as we look at it, of course our purchasing and supply team knows the projections that we have, the volume that we have by year, and we’re working to make sure we have adequate supply all the way from the mines. You rightly point that it’s one of the reasons why we’re investing in our own cell manufacturer. And as I kind of alluded to in my opening remarks, there is more coming than what we’ve announced already. So, we want to be in control our own destiny, not only from making sure we have the ability to have the cells that we need, but also to work on cost improvements and technology improvements.

I would also say the work that — we have the joint partnership with LG Chem, not just for manufacturing but also development. We also have significant resources in our R&D, and we’re also looking, as part of our cost-out plan, to need less precious metals. So, we’re working at it from all angles. We know it’s strategically critical for our future, and so the right attention is placed on it.

Adam Jonas — Morgan Stanley — Analyst

Okay, Mary, thanks. And just a follow-up. It is a question on Bitcoin. It’s inevitable. I might as well just rip the Band-Aid off, right, Mary? A growing number of high-profile companies, including a major competitor, are owning Bitcoin and crypto as a way to diversify and maximize their cash holdings and treasury outcomes in a world where Fiat currencies like the US dollar are being debased and the purchasing power eroding, and also the potential means of payment. I mean, a $45,000 BTC is optimal for a big-ticket purchase like a car. So how does GM, think about this opportunity? And yes, this is a very serious question, actually. How do you think about this opportunity? Is this something that GM would consider, and what would be the sign posts that your team would need to see in treasury in order to move in that direction? Thanks.

Mary T. Barra — Chairman and Chief Executive Officer

Sure, Adam. Well, first of all, we don’t have any plans to invest in Bitcoin, so full stop there. This is something we’ll monitor and we’ll evaluate, and if there’s strong customer demand for it in the future, there’s nothing that precludes us from doing that. So taking your question very seriously, that’s my answer, and I do you want to answer your Norway question. I’m 97% Finnish, so I like all the Scandinavian countries. We’re actually very — We look at what Norway has accomplished from EVs, and we think it’s a message to make everyone aware and drive awareness and adoption of EVs.

Adam Jonas — Morgan Stanley — Analyst

That’s awesome. Thanks, Mary.

Operator

Your next question comes from the line of Ryan Brinkman with J.P. Morgan.

Mary T. Barra — Chairman and Chief Executive Officer

Great, thank you.

Ryan Brinkman — J.P. Morgan — Analyst

Thanks for taking my question. At GM’s EV Day in March of last year, you introduced the target of selling 1 million, I think, Ultium-powered battery electric vehicles between North America and China by the middle of the decade. I don’t recall as much discussion of EV is not powered by Ultium batteries, although I see one example the Wuling Hong Guang mini-EV has in some recent months been selling 33,000 units or 35,000 units, an annualized run rate of 400,000.

So can you tell us a little bit more about the demand you’re seeing for these other attainable GM EVs in China, and what kind of market you think there could be for them? Do you see the potential to export to markets outside of China, and should we think about their volume being incremental to the 1 million units discussed at the EV Day?

Mary T. Barra — Chairman and Chief Executive Officer

So, we’re really proud of what our Wuling partner SGMW has been able to accomplish. And when we talked about Battery Day, Ultium is our new platform and we are going to continue to roll that out, and we see significant volume coming after that when — coming from that, I should say. When we look at the greater than 1 million units by mid-decade, that includes our products in GM China with our joint ventures, as well as in the US. But that’s just a starting point and then we’re going to continue to grow Ultium as well as potential products, like you say, with the Hong Guang and the EV Mini that have the opportunity to continue to grow. We’re always looking at what are the right growths inside and outside of China, but I don’t have anything specific to share right now.

Ryan Brinkman — J.P. Morgan — Analyst

Okay, thanks. And then just lastly, wanted to check in on the — on GM Financial after the strong result there. I think while the business is benefiting from gains on the sale of off-lease vehicles given the step up in residuals, that also the underlying earnings might be growing also on the harvesting of earlier investments. So when should we expect the off-lease tailwinds to subside? And then when they do, what do you think is the underlying earnings power of GM Financial?

Daniel E. Berce — Senior Vice President and President and Chief Executive Officer of GM Financial

Yeah, this is Dan Berce speaking. So, we’re guiding to earnings for 2021 of about $2.5 billion, which is comparable to what we made this year of $2.7 billion EBT. We do expect good gains on residuals again in 2021. We guided to residuals being down low single-digits, but we’re comping to what was a record year in 2020. We’re starting the year quite well from an auction standpoint beating last year’s numbers, but the tough comps from a residual standpoint will really be the second half of the year. Even if prices are down a couple of points in 2021, they will still be comparable to where they were in 2019, so leases we made in 2018-2019 there’s — we expect really good favorability when they come off-lease.

Ryan Brinkman — J.P. Morgan — Analyst

Okay, very helpful. Thank you.

Operator

Your next question comes from the line of Brian Johnson with Barclays.

Brian Johnson — Barclays — Analyst

Hi. Since most of the housekeeping questions have been addressed, I want to talk about GM Hydrotec. We know about the Nikola refocused on fuel cells. Navistar was a bit of a surprise and in fact, the whole renaissance of your fuel cell business is a bit of a surprise. I do remember the Larry Burns day, so, it was the technology of the future that was never quite the future, but now it looks like there is real opportunities there in the commercial vehicle market. So just wondering, in particular, can you talk about where the Hydrotec technology is versus competing fuel cell solutions in terms of cost per kilowatt and other key factors?

Mary T. Barra — Chairman and Chief Executive Officer

Well, we’re really excited about the potential of Hydrotec. And when you look at commercial trucks, defense, aerospace and stationery backup power, situations where you need large quantities of energy over extended periods of time to move heavy payloads. So that’s where hydrogen fuel cells are really — are most applicable. And so we see hydrogen fuel cells as well as EVs being part of the solution. I was here for — when we started working on fuel cells. We’ve never stopped and we have a very productive partnership with Honda, so I think we’ve invested appropriately and shared that investment to be efficient. So, I think there is huge opportunity. We’re very pleased with our partnership with Navistar and they’ll have vehicles on the road in 2024, so the time has come.

Brian Johnson — Barclays — Analyst

And just as a follow-on. Given that’s not core to that passenger or personal use mobility business, unlike EVs where you did rollout a spinoff, but perhaps more like Cruise where the structure of the way it’s set up kind of contemplates maybe at some point monetization. How would you think about Hydrotec along that spectrum of core could ever consider monetizing to if the price is right, it can go its own way?

Mary T. Barra — Chairman and Chief Executive Officer

Well, I think as I’ve said repeatedly, we will always do what’s in the long-term best interest of our shareholders to unlock the most value, so we are committed to doing that. We’re in the early days of Hydrotec with — and also with our GM Defense business and other opportunities. So right now we’re focused on the growth opportunity that’s in front of us and at some point there is a different structure that would enable that growth to be even faster, we’ll definitely consider.

Brian Johnson — Barclays — Analyst

Okay, thank you.

Operator

Your next question comes from the line of Dan Levy with Credit Suisse.

Dan Levy — Credit Suisse — Analyst

Hey, good morning, everyone. Thanks for taking the question. Welcome to the team, Paul.

Paul Jacobson — Executive Vice President and Chief Financial Officer

Thanks, Dan.

Dan Levy — Credit Suisse — Analyst

First question, I wanted to ask about EV. And I think you’ve mentioned in your opening remarks, you’ve had discussions with the new administration, and I think we know a big part of EV uptake until now and likely for the foreseeable future is likely the role of government in setting policies encouraging uptake. And you’re doing commercials on Norway. Norway has been one of the most aggressive in policies encouraging uptake. You have this new 2035 zero emissions target. Can you tell us what your baseline assumption is for increased regulation in the coming years is — to encourage EV uptake? How aggressive do you expect the government to be or would you advocate for the government to — would you advocate for the government — the US government to institute a ban on combustion vehicles by 2035, similar to what we’ve seen from other countries?

Mary T. Barra — Chairman and Chief Executive Officer

I think our focus, Dan, is really on delighting the customer with an incredible ownership experience of allowing them to have the vehicle in the segment that they want at the price point that fits their life. And then having the right range, making sure the whole ecosystem supports them from a charging perspective, whether it’s home charging, at work, when they’re making long distance trips or if they live in an apartment, and how do we make sure they have regular available and dependable charging infrastructure.

So, I think there’s a huge amount of opportunity with business partnering with government to make sure the infrastructure is there to support it. We do want to see — the EV tax credit, we think there is a period of time where that’s still important and, frankly, we’d like to see that not penalize first-movers. But generally, we are very much focused on delighting the customer with the overall ownership experience having the right vehicles and making sure every aspect of their ownership is a step above what is today. That’s really going to drive the adoption we need.

Dan Levy — Credit Suisse — Analyst

Okay, thank you. And then a second question on this 2035 target, which it is the first time you’ve put out firm timing on this target, and I think the word that you used in the release is aspire, rather than a hard, firm target, which makes sense because it’s 15 years out, but maybe you could walk us through the factors that you think could accelerate or challenge your ability to meet this target. And what is the largest factor determining ability to meet the target between cost improvements on EV addressing the transmission and engine capacity, challenges to be downsized, challenges on distribution, or just broadly on US consumer acceptance in the products. So what needs to be done to hit this 2035 target because you use the word aspire rather than a hard line in the sand.

Mary T. Barra — Chairman and Chief Executive Officer

Well, clearly customers will drive this and what customers want, and that’s why we’re focused on creating that excellent customer experience that I just talked about, but there is really nothing holding General Motors back. We have the manufacturing capability. We have the Ultium platform and we already have the second generation of technology that’s being worked to further take cost out and allow energy density to increase, which all benefits the consumer. We have the Ultifi buy-in, how we will provide the customer experience, and we’re partnering with their dealers to make sure it’s — order of magnitude better customer experience from an ownership perspective.

The services, whether it’s subscription or what’s offered in the vehicle from a connectivity, is another thing we think where we can completely delight the customer and build on the fact that we have leading technology right now. So to me, there is not one big factor that’s going to hold us up. We have all the assets to achieve this. We’ve got to solve issues and win customers, but I think we’re well-positioned to do that across the portfolio and that’s why we see it is such a tremendous growth opportunity for General Motors.

Dan Levy — Credit Suisse — Analyst

Great, thank you very much.

Operator

Your next question comes from the line of Philippe Houchois with Jefferies.

Philippe Houchois — Jefferies — Analyst

Yeah, good morning, and thanks for having me on the call. Following on to this discussion about this aspiration and your target or aspiration for 2035, I’m trying to understand, thinking 10 years out or so, if we assume that SAAR grows relatively slowly in a mature market and GM targets no ICE by 2035, what happens if adoption is lagging significantly, let’s say 50% or so? Logically, GM must be prepared to either shrink volume or compensate hardware revenue with other sources of revenue.

And keeping in mind for me shrinking, if you’ve got more growth and better margin is not, let’s say, negative for EV market is quite the contrary. Alternatively, if you don’t want to shrink or you’re not planning to shrink, you need to work on squeezing your competitors especially, basically, making their growth in EVs more difficult. I’m just trying to understand strategically, over the next 10 years, 15 years, is GM ready to shrink or is GM going to be aggressive? That’s what I’m trying to understand, or am I missing something?

Mary T. Barra — Chairman and Chief Executive Officer

I think we’re going to be aggressive because I think we’ve got the technology, we’ve got the talent, we have the manufacturing capability, we already sell more vehicles in the United States and we’re number 2 in China. So, I think we’re well-positioned because of our current brand strength around the world and our position, and then with the technology that we’re bringing forward, so we don’t plan on shrinking. We plan on growing.

Especially if you look at in the United States on the coast, we don’t get what I would say is our fair share of the market, that’s a growth opportunity right there. But we think we’re extremely well-positioned and we — again I can’t underestimate how much opportunity we have with the Ultium platform because of the modularity of it that we can take so many vehicles across so many segments, price points, to really delight the customers. So that’s our focus.

Philippe Houchois — Jefferies — Analyst

Very clear. Thank you very much.

Operator

Your next question comes from the line of Chris McNally with Evercore.

Chris McNally — Evercore ISI — Analyst

Good morning, everyone. Mary, I wanted to follow up on the questions on Cruise. And I know you can’t be too specific on exactly when a launch would happen or even maybe a more extensive beta testing of a program in San Francisco, but could you at least maybe talk about some of the ambition to test aggressively in other cities for whenever a commercial launch or a beta launch was to happen, could we expect multiple launches sort of in succession on a sort of an annual-type basis?

Mary T. Barra — Chairman and Chief Executive Officer

I think you will see — we talked very early on that once we have launched in one city, the opportunity to go to the next, do the work to make sure the technology is adaptable to the unique things of another city. So, I think once we launch successfully and demonstrate that the technology is safer than a human driver and we demonstrate to customers, I think that we can really increase the number of cities that we’re offering it quite quickly and that’s what we’ll focus on doing.

Chris McNally — Evercore ISI — Analyst

And then finally, the rationale behind the tax deconsolidation of Cruise, it’s super interesting. I’m just curious, does it ever make sense that Cruise is its own or separately-listed asset so that funding options would be obviously much broader than internal or external private investors?

Paul Jacobson — Executive Vice President and Chief Financial Officer

Hey, Chris. It’s Paul. So, I would say those two issues are pretty separate and distinct from each other. The tax deconsolidation is really just mechanical because our ownership is below the required thresholds to consolidate for tax. And obviously with their spend and their growth, we’ve benefited from that, which is why we’re seeing a tax increase with the deconsolidation.

I think what we’ve proven out with the last round of funding is an ability to partner and raise external capital alongside the strength and the foundation that GM provides. So, I think access to capital is really unconstrained the way we think about it right now. We bore that out in the last fundraising round.

Chris McNally — Evercore ISI — Analyst

Okay, thank you.

Operator

Our last question comes from the line Jairam Nathan of Daiwa.

Jairam Nathan — Daiwa — Analyst

Hi, thanks for squeezing me in. I have two questions. One for Mary, one for Paul. For Mary, longer-term, do you see EVs as an opportunity to enter — re-enter Europe with a clean slate, especially given governments having more — conducive to giving incentives to EVs? I believe EVs amounted for like 10% penetration in the fourth quarter of 2020. What’s your thoughts around that?

Mary T. Barra — Chairman and Chief Executive Officer

There is nothing that precludes us with the sale of Vauxhall to do that. We already have our iconic products in Europe right now with Cadillac, and the Chevrolet, Corvette, etc., so there is nothing that precludes us and I think it’s a natural growth opportunity for us as well.

Jairam Nathan — Daiwa — Analyst

Okay, thanks. And Paul, coming from a industry which benefited significantly from consolidation, what are your thoughts for the automotive industry there?

Paul Jacobson — Executive Vice President and Chief Financial Officer

I think that’s a bit of a trick question, but I think they’re obviously very different industries across the board. I think there is some similarities in that. The industries are both capitally-intensive, but what we have here is much more of a platform to create a growth model. And I think we saw some of that in my past life as well. But really here it’s about diversifying the business, it’s about growing into the increasing tipping point-like demand of EVs and AV technology going forward. And when you combine that with the strength and the brands and the capabilities of GM, I think we’ve got a lot of opportunity ahead of us.

Jairam Nathan — Daiwa — Analyst

Okay, thank you. That’s all I have.

Operator

Thank you. I’d now like to turn the call over to Mary Barra for her closing remarks.

Mary T. Barra — Chairman and Chief Executive Officer

Thank you. Well, first of all, I appreciate all of you joining and thanks for the great questions this morning. I hope you know and see that it’s overwhelmingly true that we are at an inflection point on sustainability, on inclusion and diversity and on growth that will deliver shareholder value not just this quarter, but for many years to come. I hope that’s coming into even sharper focus for all of you. Every quarter moving forward, you can expect to hear us advance our story. I believe we have the talent, the technology, the profitability and the balance sheet to lead, and we will continue to innovate and I look forward to sharing more in the months ahead. So, thank you. Please take care and stay safe.

Operator

[Operator Closing Remarks]