General Motors Company (GM) Presents at Deutsche Bank Global Auto Conference (Transcript)

General Motors Company (NYSE:GM) Deutsche Bank Global Auto Conference June 15, 2023 11:55 AM ET

Company Participants

Paul Jacobson - EVP & CFO

Conference Call Participants

Emmanuel Rosner - Deutsche Bank

Emmanuel Rosner

All right. Good afternoon, everybody. Thank you so much for joining us for this session with General Motors as part of Deutsche Bank's Automotive Conference. My name is Emmanuel Rosner, and I'm the lead U.S. autos and auto technology analyst here at Deutsche Bank. I'm extremely pleased to be joined by Paul Jacobson, who is the CFO of GM.

GM certainly needs no introduction, one of the leading global automakers, has been accelerating its transition to an all-electric future targeting 100% EV sales by 2035, I believe. Near term, the Company is planning for 400,000 units of North American EV cumulative by the first half of 2024, with about 150,000 plans for this year and capacity of about 1 million units in North America alone by 2025.

And for the benefit of everyone here in the room, if you haven't seen in front of the lobby, there's a fantastic Chevy Blazer EV, which hasn't been release yet, but available for test rides and a couple of Hummer SUVs, which are very sharp looking. So definitely go ahead and go for a right, if they're still there. But thanks for being here, and let's dive into the questions.

Question-and-Answer Session

A - Paul Jacobson

Great. Thanks, Emmanuel, and appreciate the opportunity and nothing makes you feel more powerful than driving a Hummer EV on the streets of Manhattan.

Emmanuel Rosner

Very true. Let's start with industry conditions, just to set the stage. Can you provide an update on the operating conditions you're seeing so far this year? Does that leave you on track for the 5% to 10% unit volume growth that you're targeting for the year?

Paul Jacobson

Yes. So far, as we've said on the first quarter earnings call and a couple of other statements that we made, the year has gotten off to a fantastic start. And the pace of that, the strength of the consumer, the strength of the products as well as some of the tactics that we're using going to market and how we're managing the business. It performed ahead of our expectations. That was true for the first quarter and allowed us to raise our guidance. And I'm proud to say that was true for the month of May, too.

So what we saw was a very strong continuation of what we've seen in the first four months of the year. Through May, inventories were flat. Average transaction prices for us were actually up, and they were up more than incentives were even on a year-over-year basis. So peak a lot to, as we said on the call, the trim levels, people are continued to buy up in trim levels, but they continue to really, really have strong demand for our products. And the way we've been we've been managing that, I think, has been really extraordinary. I'm really proud of the team for the margin strength that we continue to deliver throughout the year.

Emmanuel Rosner

That's very good to hear. And then I guess on the supply side then, I think there were some in challenging conditions over the last sort of like 18 months or so. Have things generally more stabilized, you have better visibility into the supply chain?

Paul Jacobson

So, I've been here at GM for 2.5 years, and it's been rough supply conditions. So, I thought that was just the business. So, the reality is it's much better now, but it's still not perfect. We still have some disruptions from time to time. And as we've said before, I think one of the biggest challenges in the industry is particularly around outbound logistics.

So you've seen the composition of inventory change between being on the loss of dealers and being back waiting for shipment, et cetera, which is somewhat regulated, the flow of vehicles into the retail market because some of the challenges of the outbound logistics stream that we've seen.

But we've been able to manage that. We've been able to take production up and continue to get those vehicles shipped and really proud of the way we balance that against our margin target. And what we're striving to achieve.

Emmanuel Rosner

And then you are making encouraging comments about certainly demand for your vehicles and pricing for your vehicles, any specific observations around the industry? Is demand overall staying pretty strong use pricing remaining sticky? Or do you feel like you're outperforming in a way based on sort of like some of your actions and trim levels?

Paul Jacobson

Well, I think the industry has actually been strong, but I also think we're outperforming in that context as well. So if you recall, we said at Investor Day that we had planned the year at a 15 million unit SAAR. We've actually been trending a little bit ahead of that for the first part of the year. So lots of encouraging signs for the industry, but I think even GM with our portfolio the way we've been able to drive share, drive volume growth while keeping margins strong and incentives low. I think, has been a really, really good barometer for the GM culture.

Emmanuel Rosner

And then maybe just finally, still on the topic of pricing. I think one of the messages so far this year has been, yes, pricing may eventually sort of decline. But dealers may sort of like be a little bit of an absorber where they would see first, some of the decline in their margins before you see it. Has that essentially started playing out? Like are you seeing some compression around dealer margin, and this is where some of the initial pricing pressure would be?

Paul Jacobson

Yes. So it's a great question, Emmanuel. And if you look across the industry data, we've seen a pretty big decline in ATP versus MSRP. But we're coming off a period where it was well above 100% for a period there. So still kind of above where it was pre-COVID levels. I think our trajectory has been more stable. I don't think our highs were as high as the industry and as a result of that, I don't think our decline has been as big across the industry. So we're still seeing strong retail pricing. And like I said, strong demand for upper-level trim packages, et cetera. So the Company is performing really well.

Emmanuel Rosner

Great. Great to hear. Let's just when we focus on your outlook for this year then. You raised 2023 guidance after a strong Q1 performance. But the outlook you gave at that time suggests still sequentially declining EBIT for the rest of the year. What are the puts and takes? I mean, is that still the view, but what are the puts and takes between the first half and second half? And what extent does this reflect concerns versus things that you may be seeing?

Paul Jacobson

Yes. Look, I think we've confessed to conservatism in the guidance all through the year. We went into the year with a plan that said everything that we're seeing around us, not our business, but everything we're seeing around us is indicating some weakness of the consumer. So, we knew we had a little bit of a spike in CapEx going up to $11 billion to $13 billion this year. We needed to build a plan that said under conservative assumptions, can we fund our CapEx and still drive the type of free cash flow.

Now I think the way the market has characterized that has been, well, these are our expectations. And we pretty clearly said on the first quarter earnings call that, based on the strength of the consumer, it gave us the confidence to be able to raise our guide commensurate with the outperformance that we saw in the first quarter. But we also said at that time if the consumer remains at this level, and this strength throughout the year, we expect to significantly outperform kind of what we've said.

So, it's not as much expectations as it is just trying to sit here and say, okay, let's acknowledge what's going on around us so that we put that plan together. But month after month, as we've seen that go, we've seen the consumer outperform and be very, very stable throughout the year. So it's going well, but we're going to continue to be cautious about that because we can't ignore what's going on around us.

And you would never do this, but some of your colleagues might write how tone deaf we are if we came out and said, all is going to be great forever. And they might be right in that standpoint. So you've got to make sure that at the end of the day, you are balancing what's going on around us, but not necessarily qualifying it as expectations. I expect the Company is going to continue to perform well, and we're going to continue to drive that narrative.

Emmanuel Rosner

And I guess outside of the environment, are there any specific reasons that are GM specific. Soon the cost side, where second half essentially, you're incurring higher costs in the first half? Or was it just the environment and sort of like that level of conservatism in terms of first half versus second half EBIT trajectory?

Paul Jacobson

I would say that trajectory changes shape every month that you go by across the board. As we said before, our cost program came out of the gates really strong. So, we had said 30% to 50% of that -- of the $2 billion we would get this year. We're now saying we get it probably in the 50% range of that $2 billion. So, that's going to continue to accrete as we get into the second half. Largely, I think that is really in the pricing environment in the consumer environment. So, we've got to be conscious of maybe the consumer does change, maybe it doesn't. And if the consumer doesn't change, like I said, we could be positioned to outperform that guidance.

Emmanuel Rosner

Okay. And then specifically about this cost savings program. So, you've talked about having essentially a head start in the $2 billion cost savings. I'm expecting that to generate like 50% of that this year. Beyond that specific program, are there any other big actions in place to execute and the rest of it?

Paul Jacobson

We're really looking across the Company. So, there's a lot of complexity reductions that we're doing. And we'll have more detail on this as we as we come into the second quarter earnings call, et cetera, and look at where we are heading into the second half of the year, but it's complexity reductions, it's reducing marketing spend, it's reducing a lot of other discretionary spend travel overhead expenses, et cetera. And I think we're learning because what I don't want this to be is, I don't want this to be a program and then we go back to the way it was.

We've really got to change and cultivate continuous improvement on the cost side because this is the beginning of a journey, right? We know where we need to be as we not only sort of get EVs to the margins comparable with ICE, but then ultimately expand those margins for the Company going forward. So, this is laying a lot of track for the future and instilling that level of discipline and proud of the organization. They're making good progress.

Emmanuel Rosner

And I guess one consistent theme we're hearing from suppliers both here and then throughout the year is discontinuation of recovery negotiation with their automaker customers on non-material inflationary costs, energy, labor, and there's some pretty decent traction actually in sort of like with this. So are you contemplating all of this in your guidance? How are you seeing some of these costs evolve as we move into the back half of the year?

Paul Jacobson

Yes. It's a fair question. I think we established a pretty good track record last year as we have built in some expectations into our guidance, and the way we thought about the business isn't any different. The reality is our suppliers are partners with us. We want them to make money. But there's got to be a balance across the board in terms of where the risk is and where the economics are and so on.

So, we continue to work with our suppliers. Some are in more desperate situations than others. That's been true even in normal time. So, we're going to continue to treat those partnerships like they are. Our supply chain team has an incredible track record. I think they get voted pretty consistently best OEM to work with. And that's because of that partnership mentality, and we're going to keep doing that.

Emmanuel Rosner

A couple of questions maybe on, it doesn't look like you're seeing really any weakening so far. But I'm interested in sort of like the downturn sensitivity in case there was. I guess how confident are you in maintaining this 8% to 10% North American margin profile in a more challenging environment for the consumer? Can this be maintained sustainably even if industry price or eventually normalizes and also as your EV share ramps, I guess, what would be the levers to keep things pretty stable?

Paul Jacobson

Yes. So certainly, as the EV share ramps, we believe we can hit that, and that's why we gave the guidance going forward. I think you -- it's rare that things happen in isolation, right? So, we can talk about a weakening consumer. Well, that's going to mean prices are going to come down. But as prices come down, quite likely that units go up because we have been operating in what has traditionally been thought of as a recessionary SAAR environment for the last couple of years.

Now, it's been production constrained, not demand constrained, which I think has helped that narrative a little bit. So, the question is if we do see a downturn, what does it look like? In all likelihood, it's going to probably consume some cash, but it's not going to consume as much cash as it has historically. Because inventory levels are much, much lower than what they've traditionally been historically. So, I think we've got a good playbook.

We've got discretion in our CapEx that we could take out. We've leaned into it the last couple of years to accelerate that journey. We can lean out of it a little bit, too, just based on some of the head start and so on that we've built. So I think we've got enough flexibility to do it. And of course, the cushion is the free cash flow that we're generating right now. So even with the CapEx that we've got, we've still got $5.5 billion to $7.5 billion of free cash flow coming out of that. So it's between that, the balance sheet, some of the discretionary capital, I think we've got pretty good shock absorbers in place.

Emmanuel Rosner

And on the CapEx specifically, so you've guided to spending about $11 billion to $13 billion in CapEx per year through 2025, through this transformation. How would you approach this, I guess, in where could you cut if needed, in a downturn? Are there any areas that spending that is more discretionary?

Paul Jacobson

Well, I think in any context, whether it's operating cash flow or it's capital, whether it's our business or it's a different industry, it's hard to say, I've got an $11 billion to $13 billion pot of money that I can't go find reductions in and reprioritize things going forward. So, we'll continue to do that, but that's honestly something that we need to do anyway.

If we're focused on driving the business for free cash flow, we've got to constantly be looking at the prioritization hierarchy of the capital spend against the performance of the Company and make sure that we don't put ourselves in a position where we're investing beyond our means, unless it's for a very short period of time because it's ultra priority capital and we've got balance sheet capacity to do it.

That's the driver between having -- or behind having an investment-grade balance sheet is essentially making mature that I've got a shock absorber for the ultra priority things that I need to do when maybe the cash flow wasn't there to do it. But that's a tool that can only be used in a short time period because you don't want to destroy the balance sheet in pursuit of things that you want to do. You've got to manage the balance sheet in pursuit of things you have to do. That's what managing a company for free cash flow looks like.

Emmanuel Rosner

And then one topic that's on top of investors' minds is negotiation coming up, I guess, maybe later this month or next month and then the contract ending in the third quarter. How are you currently approaching this event?

Paul Jacobson

Well, look, I think at the end of the day, we've got to maintain a good relationship with our employees because you want people that are putting quality effort into the work and they feel valued for the work that they're doing going forward. So, I think this -- we're in the period where we're trying to seek understanding with each other, and let's understand what priorities are going forward and getting together to work it out. But I'm confident, as has been done for many, many negotiations beforehand that that's something that can come to an agreement and continue to work forward for the good of General Motor. That's what we all want.

Emmanuel Rosner

Let's shift focus to the BEV strategy. There are obviously a lot of credible EV players rising, some in China, obviously, good transformation being done in Europe. You have global players like yourself that are in the middle of an EV transition. And this obviously makes it fairly competitive. What are the top key differentiating factors that will help you drive growth and improve margins or grow margin in the EV business?

Paul Jacobson

Well, I think you're absolutely right. The environment is ultracompetitive and getting more so globally. And we haven't shied away from that. And we've taken ownership of the fact that we need to be able to drive our margins to where they need to be to be competitive in that landscape and among the bat going forward. So going out and scrubbing overhead costs, et cetera, as a part of that mission going forward.

But I think the biggest advantage we have is we really kind of had a head start on the platform. So you've got Tesla and you got everybody else that's out there, and this is work that began at GM really back in 2018 of positioning the Company to be able to do this, and many other OEMs that are trying to play catch-up on the platforms going forward. So that gives us an ability to start to scale much, much faster than where others are.

And we're in the early, early stages of that. But as we go from 20,000 vehicles in the first quarter of 23 to 1 million vehicles in 2025, you start to get a sense of that rapid scaling that's ahead of us going forward. And with that, we'll come to savings, we'll come the efficiencies and the economies of scale that we can get to be able to help ourselves grow in terms of being competitive and to be able to do it faster than some of the other competitors may be able to do.

Emmanuel Rosner

In terms of global focus for your EV business, obviously, a lot of the product is in North America, which is where some of your legacy operations have been as well. But China is an important market. Europe is obviously a very fast market in terms of your EVs for sure. How are you approaching this in terms of product lineup? And can things look a little bit different than an EV world for you than it has been over the last few years.

Paul Jacobson

Well, I think we've got to be careful about trying to be too big, too fast, right? We've got to make the portfolio work and then expand off a platform of strength. So yes, we're bringing vehicles to China right now. A number of those are vehicles like the Cadillac LYRIQ that we're producing anyway. And there's an opportunity. And that vehicle has been really well received by the Chinese market in the early stages of getting volume over there.

Europe is -- it's a region that, from a legacy perspective, has had its challenges for us. We're much, much leaner. We're looking at how do we go there, establish and hold in that market in a way that is much, much more asset-light, much more capital friendly going forward, et cetera. And if we can find ways to do that, there's a platform to expand that.

But the focus has to be on how do I get scale in North America and how we take that foundation and that pillar of strength and expand it globally rather than trying to go and play catch up in every market in the world.

Emmanuel Rosner

So shorter term, as you try to ramp up the EV, there have been some few hurdles, I guess, initially. Are you on track for 150,000 units of EV volume for this year? And 400 units by, I guess, the first half of next year based on your battery production ramp?

Paul Jacobson

Yes. So, we have had some hurdles that we've had to overcome and we're continuing to work those out. And I suspect there will be more in the future as the team continues to work through those. But we still feel good about those volumes and getting to that ramp. And the 400,000 to 1 million in 2025 is just the beginning. And then, we're going up from there because to go from 1 million to 100% light-duty vehicles in 2035 to grow either from that perspective. So, we feel good about that.

Emmanuel Rosner

I mean, anything can show on the production of Ultium cells in Ohio. Are you on track to reach full capacity at that first plant by year-end?

Paul Jacobson

Yes. So, Lordstown is going well as is construction at Spring Hill, and we expect to have that online late this year still as well. So early returns on some of the cell production, I think, are even exceeding our expectations. Now we've got to make sure that we go from cell to module to pack to vehicle, et cetera. So all of that is getting worked through, but the cell production and the partnership with LG is strong.

Emmanuel Rosner

So, I think you've targeted -- you shared the target of $87 per kilowatt hour in cell cost as a key metric and important to reaching low- to mid-single digit EV profit margin in 2025. Can you unpack this a little bit more? What are the assumptions that go into that in terms of scale, Ultium costs? How much -- I mean, how much of it is secured versus sort of like some assumption on the future trajectory of raw materials?

Paul Jacobson

Yes. So this gets really complicated really fast, and we could probably spend another hour talking about the raw material supply chain of our 23 minutes. But what I would say is, there's two items around the raw materials, right? There is the security of supply. How do I know I'm going to get what I need? And then there's the price and how do you think about that? So from a security of supply perspective, as we said, we're fully contracted for 2025 volumes. We're making great progress on that 2026 to 2030 ramp going forward.

And then on the pricing side, we're building a portfolio, right? So, we don't want to say, "I'm going to take a 100% spot. I don't want to say I'm taking a 100% fixed price either from that standpoint. We want to make sure that we secure the portfolio that ultimately is going to give us a long-term sustainable competitive advantage, so where we can put in equity dollars to potentially get a little bit more favorable pricing, whether that's some type of collars or at some type of discount to market, et cetera. Lots of different ways you can do that, and we're constructing that portfolio.

So for 2025, and your question specifically, we didn't assume that lithium prices were going to be $75,000 a ton. We expected somewhat more normal, but not normal as defined by the typical 12,000, et cetera, but more normal reflecting a more unbalanced supply/demand environment in the short run. So, I won't get into specifics because, obviously, we have to negotiate our prices with our partners as well from that standpoint. But we do feel it's a reasonable set of assumptions when you look and unpack the BRM stack inside the cells, and it's something that we can get to.

Emmanuel Rosner

And then and IRA battery production credit, that's a material opportunity for EV margin as well. I think you were saying that, that would essentially take you through similar type of margin as you have on ICE, I guess, but by the targets.

Paul Jacobson

3,500 to 5,500 a vehicle?

Emmanuel Rosner

Yes. And so, I think this year, you said at least $200 million of benefit. Can you share any details on the financial arrangements you have in place to share those benefits with your partner, LG, I guess? And then the fourth battery plant was just announced to be with Samsung, I believe. What's the rational for adding a different supplier there?

Paul Jacobson

Well, the answer to your first question is, I can share that, but I'm not going to. That's one of those things I can do once. But we'll have more details on how to think about that IRA ramp, et cetera, but I don't want to get into -- as we've said before, I don't want to get into what's good for us, what's bad for our partners, et cetera. We're working through that. And I think we'll have a good solution that works for the long term for both of us across the board.

And then as you look at Samsung, a different cell form has different advantages, whether it's performance or whether it's costs, et cetera, there's different ways to look at that portfolio. But that's the beauty of Ultium where we've said at the end of the day. The chemistry, the form of the cell is irrelevant to Ultium per se because we can do the same software. We can do the same interface as we can use the same motors and so on.

And the beauty of having that platform is the flexibility it gives you because I wouldn't be surprised if 10 years down the road, there's a different cell form factor or there's a different cell chemistry. This is something that's an evolving technology over time, and we're going to see that converge into cost performance trade-offs that ultimately makes sense for everybody. And if that's different than what it is today, we're still going to be able to adopt that in our vehicles over the long run.

Emmanuel Rosner

Now Ford first and now GM recently announced that you will leverage Tesla supercharging stations. What is the message you're trying to send with this partnership, and any feedback from your customers on this announcement so far?

Paul Jacobson

Well, you did say Ford did it first. I'm hoping that as the history books are written 20 years from now, they say, well, we kind of did it at this time.

Emmanuel Rosner

Within a week.

Paul Jacobson

But it was kind of an upside. But you're right. And look, that's off to them for that deal. And ultimately, what that represents, I think, is sort of an admission that from an industry context, we've got to have some standardization across the board. And as we looked at the technology, and as we looked at the -- what Tesla was looking to do, I thought that was ultimately best for our customers across the board. So now as early as '24, our customers will get access to the Tesla network, with all of our vehicles beginning in '25 going forward, we'll be in that position.

So, this is ultimately what's best for customers. We -- as we announced, we believe we'll save up to $400 million in capital because we had talked about all that capital that we are allocating to build what, in some places would be a duplicative charging structure. We save that. And that's -- those are the types of efficiencies that I think are good for the customers are good for investors. And they're good for the country as we think about what's the most efficient way to deploy this EV ramp-up as a society.

Emmanuel Rosner

So, you're saving on the capital, you would have deployed to build your own charging stations, and you're not contributing any CapEx to Tesla.

Paul Jacobson

No. We'll have the ability, I think, over time, to be able to do that if we want to build them or if we say that they are charging stations that are in a different location than Tesla would prioritize. There's an opportunity to do that together because it benefits Tesla customers. It benefits GM customers and it benefits EV customers in America. That's what we ultimately are here to do and to be able to do that in the most efficient deployment of capital as possible.

Emmanuel Rosner

And I guess, still on Tesla about, they broke ground recently on a lithium refinery, I guess, in-house. The Company has talked extensively about refinery capacity as a key barrier to EV transition. Do you see the need to be involved upstream? Do you think that having secured all your needs, you're good to go? Or is there a longer-term need to be involved in our upstream?

Paul Jacobson

Well, I mean, certainly, the deals we've already announced have us going to a level of upstream participation that we haven't historically done, right? So, we're going into the mining space with equity investments, et cetera. So I think that's an acknowledgment of, we already have that risk. If a mining project doesn't hit its utilization, it's going to affect prices for us anyway across the board just based on the growth curve that needs to happen in lithium and these other battery raw materials.

So, we are going upstream from that standpoint, whether we choose to build our own refinery or not, I don't know. But at the end of the day, we've got to have partnerships with people that can get us the lithium in the form that we need that, whether it's hydroxide or carbonate, et cetera. And we need to be willing to help fund that and where I can help fund some expansion in exchange for guaranteed capacity. That's a good thing and we should be open to doing that.

Emmanuel Rosner

I want to come back about the strategy in China. I know you give us an overall answer on global, but it's the fastest EV penetration to be expected for the next decade. You're bringing some vehicles there, but can you talk more broadly about the EV strategy there? Do you expect meaningful growth for GM out of that region? And would you consider setting up wholly-owned operations there versus the arrangement that you've had so far?

Paul Jacobson

So, we are bringing some GM vehicles into that market. And like I said, early days, but we've seen some -- we've seen some success among consumers. It is rapidly growing. It is also intensely competitive as we've seen across the board. So, we need to make sure that we're managing whatever we do in any market we serve and a capital-efficient margin generating strong performance.

So, I think that's things that we can do, and ultimately, continue to sort of evolve and watch as our volumes increase, making sure that we're hitting our profitability targets and where we're going. There's an opportunity, I think, for us to be a successful player in the EV space going there. The ICE business is still doing okay. It obviously has faced a lot of challenges over the last couple of years with COVID and with the economy, et cetera, but it's doing okay. So it's a good provider for us. At the end of the day, it's an important market, and we're going to make it work.

Emmanuel Rosner

And then just a different topic, the future model of retail, I think you called it GM digital retail platform. You've talked about having 2,000 hours per transaction for GM. Can you provide an update on the progress of this retail model? And how have dealer's response had been in the process?

Paul Jacobson

So it's been the early stages. We've had it with the Bolt. And now we're rolling it out with the Cadillac digital retail program. So the early returns are good. We've got to obviously ramp that up to get to the full $2,000. And the concept, as we articulated at Investor Day of the regional distribution centers, which will allow us to fulfill tailored customer demand on a much faster basis going forward without having to load up dealers with a lot of inventory that ultimately has to get subsidized through financing or through incentives, et cetera.

So, I think it's a good model. And it's not -- we're not at a point where it's necessarily a zero-sum game where $2,000 to us is $2,000 coming out of the dealers. I think we're finding ways to grow the pie between us and then share that. So, the dealers also benefit if they need a lower footprint, they don't need the real estate. They don't need the staffing. There's a lot of different things that can make it more efficient for them as well. So, the early feedback from the dealers that are participating is strong. And we think that this is going to be a good model, and we're confident that we'll be able to get to those $2,000 of vehicle savings.

Emmanuel Rosner

Maybe final topics. Let's talk about Cruise and let's talk about software. I think recently, the industry overall has taken a step back in going to full autonomy, I mean, in general, I think a lot of players are approaching it with a more programmatic approach of maybe higher level ADAS, sort of like semi-autonomy. But GM has been very committed to investment in Cruise. What do you think is a longer-term advantage of going down this route versus a different way?

Paul Jacobson

Well, I think one of the things that I'd chuckle at, as I'm watching TV is all the discussion about AI and what the future is. And we probably have one of the most sophisticated AI platforms and autonomous driving that exists anywhere. And the scaling that's occurring with cruise, they eclipsed 1 million miles earlier this year and then 90 days later, eclipse 2 million miles. So, they're in a position where they're in really rapid growth and deployment of the AI. And these miles are all driverless. So it's not like we're Level 2. We're full Level 4, no driver in the vehicle at all.

And that's going to be a long-term sustainable competitive advantage of I feel like we've put a lot of capital into it. We need to be able to harvest the returns on that capital. And as we get to $1 billion of revenue in 2025 and be able to grow it even beyond there, pretty rapidly, you're starting to see that unfold right now as we're now expanded to two additional cities with Dallas and Houston, as Kyle has announced as well as Austin and Phoenix. And we're just -- I would say, cruising along, but that would be a little bit to pun oriented. But we're in that rapid scaling phase right now and 2025 isn't that far away where we're going to start to see some pretty solid revenue accretion between now and then.

Emmanuel Rosner

I guess in the process it requires considerable cash investments because even the revenue targets wouldn't necessarily equate with free cash flow quite yet, I guess, by mid-decade. Is that -- what is sort of like the ultimate end game? Is this that this will be so profitable by the end of the decade that it's worth investing in all these money upfront?

Paul Jacobson

Absolutely, I mean between -- not just the ride share applications, but delivery but personal autonomous vehicles and ultimately, where that's going. Nobody has a cost-effective Level 4 solution that's out there for customers. But we've got the Level 4 technology, as we've said before, we started with the strategy of saying, let's solve the problem. The problem is the most difficult thing to solve, which is get the tech right.

Once you get the tech right, you can bring the cost down, but trying to manage the problem from a lower cost is a different way of attacking it. But one that is historically seems to be taking longer than what we've been able to do as we get the cost of the tech stack down. And as we bring that out and deploy that in the origin and the next-generation origin after that, we see a pretty good runway to be able to get to leadership positions in personal autonomy.

Emmanuel Rosner

And what's the technology strategy for semi-autonomy in the average consumer car? Would IT be sort of like a version of crews as well? Or are you going sort of like a different path? And I guess related to that, and so I guess, sorry for another Tesla related question, but Elon Musk looking to license the -- or open to licensing the FSP. Is that something that GM could be interested in?

Paul Jacobson

Well, we already have our form of that, which is Super Cruise, which is driver assist technology that is really, really in high demand. In fact, our consumers rate that is kind of the number two thing that they're looking for in their vehicles Beyond I've purchased and enjoyed the vehicle already. So Super Cruise is a platform that's getting expanded. I think we'll have it in 22 models as we get into the late this year and early next year. And you're going to see continued performance there as we continue to enhance that while Level 4 is coming down in cost as well. And we think that strategy is the right one as it relates to ultimately getting attractively priced consumer benefit.

Emmanuel Rosner

Maybe final one for me. Can you just remind us of your revenue targets from software and services over the mid and long term? What solutions do you expect to monetize? And how can you track your progress?

Paul Jacobson

So we said at Investor Day '21 the $20 billion to $25 billion opportunity for software, which included subscriptions include some of the digital retail platform and included insurance et cetera. So insurance is now being run by the GMF team. They're doing a great job of starting to get that rolled out and getting that ramped up across the board.

We'll have much more detail on that at our Investor Day this fall and really excited about Mike Abbott joining and what he's going to be able to do with his experience from Apple coming in and helping us lay out that commercial platform because what we don't want to do is we don't want this to turn into customers got something for free before and now they're having to pay for it. It's really how do we enhance the experience for those customers that want to purchase it?

And then how do we create so much demand for it because of the -- for lack of a better word, the awesomeness of the technology and what it can do that these are features that customers are happy and excited about purchasing up because it enhances the performance of the vehicle, customization of the vehicle et cetera, lots of different things that we can do with that. We'll roll that out more at the Investor Day.

Emmanuel Rosner

Looking forward, I assume we might have time for a couple of questions in the room, if there are any. Do you have a question, just raise your hand.

Unidentified Analyst

Thank you. One of your Detroit peers, Ford, has taken a little different tact on organizing their business with Ford Pro. I know you have a very strong commercial business as well. But I wondered if you could just kind of give us your take on that, your kind of position because the data that Ford's releasing is 40% market share, 2x the nearest competitor. So scale advantage, disadvantage, growth opportunity similar profitability of what they're disclosing. Anything you can share with us on that would be great?

Paul Jacobson

Yes. So the fleet business is one that's obviously transformed quite a bit during COVID as well, whether it's the fleet trucks or it's the rental cars, et cetera. We've seen margins in that business improve significantly to much closer to what we would typically see in wholesale and retail margins as well going forward. So that's a business that is growing, and it's been a source of some of the -- both the share gains as well as some of the SAAR increases that we've seen year-to-date as production has increased we've been able to flow that there.

But it's a very different model than it was historically where you took extra surplus production, and you just kind of dumped it into the fleet business. So the team is doing a great job with that. We've talked about segmentation a lot. What I would tell you is there is an acknowledgment that we need to think about the business differently, but there's still a lot of overlap between auto production, whether it's an ICE vehicle or an EV going forward. So we're very content with the way we're reporting. But as we said at Investor Day, there will be more that we'll talk about as we look to sort of claim success on the EV ramp going forward.

We need to be more transparent about that going forward. And as we get to Investor Day, as we ramp up the volumes, you'll start to see a little bit more disclosure on that going forward. So the reality is everything that we need to do, we need to do anyway and is being managed regardless of how you think about it segmentation. It's just a different way of presenting the business going forward. But much of that information we can give anyway just hard as sort of regular disclosures going forward.

Unidentified Analyst

Ford has talked about in-sourcing the inverter on their Gen 2 vehicles. Suppliers that are ramping inverter volumes on a Tier 1 basis are now gaining dramatic scale and potentially offering a cost benefit. Can you talk about what your plan is for Gen 2, Gen 3 in-source versus outsource? And how you're thinking about taking your powertrain capabilities and transferring them to the powertrain on the electric vehicle side?

Paul Jacobson

Yes. Well, obviously, they're very different when you think about engineering, design, et cetera. And what I would say is just really broad brush. If it's something that is not customer-facing and sort of brand accretive, we need to be open if there's somebody that has a lower cost, more efficient scenario to be able to utilize that going forward.

There are some things that we think we do really, really well. That's going to change over time as we see that. But also more importantly, we've got to make sure that we can own the customer experience as it relates to our brand and what our customers want. So that probably more spills into tech than it does in sort of some of the raw motors and battery systems, et cetera.

The cell platform is one that's really important to us, as you've seen with the investments that we've made. But how do we think about running the business as efficiently as possible going forward? And if there are things that we can do better than suppliers, we should do them. If there are things that suppliers can do better for us then we ought to think about that.

Emmanuel Rosner

Awesome, well, looking forward very much to the Investor Day, and thank you so much for the conversation.

Paul Jacobson

Thanks for having us, Emmanuel, great talking to you.