With the rise of Tesla, all EV startups have seen absurd gains to their stock price and valuations. But is that sustainable? And why don’t we consider GM an EV stock? It’s madness really. This is because GM will spend $27 billion on all-electric and autonomous vehicles through 2025, an increase of $7 billion from initial plans announced in March.
GM already has the supply chain, the partners — okay, maybe not Nikola, haha.
The increase in investment will support GM’s plans to release 30 new EVs globally by 2025, including more than 20 for North America. This kind of ambition is what could enable GM to survive the transition to EVs in a self-driving universe. GM Cruise is not a terrible idea, though unlikely to be as successful as GM making general purpose EVs.
So $GM is like betting on America, with a stock price of only around $40. Meanwhile unknown and speculative EV companies like Nio, Li Auto and Xpeng all have higher stock prices. How can that be? It’s because we don’t think of $GM as an EV stock. But what happens when it becomes just that?
Tesla, a company worth $540 Billion? Give me a break. That’s over 20 times annual sales and nearly 35 times book value. Pandemic investors are not playing the game based on any fundamentals.
As cryptocurrencies are dependent on the price of Bitcoin, so too these scammy companies seem to follow Tesla’s outrageous stock price. The fool’s gold of so many bad investors who inherited money. Thank you, Robinhood app.
The speculative SPAC companies of 2020 are really dreadful. Nikola is still worth over $10 billion despite accusations of fraud and having no revenue at all. Shares of electric truck company Workhorse have shot up nearly 800% this year and are now worth over $3 billion, despite barely any revenue and a production target of just 1,800 vehicles for 2021.
So how about we give some credit to GM for trying to pivot to the future of automobiles? They were late to catch on, but at least they are trying. It’s the right thing that GM pulled the plug on a Nikola deal, it made no sense. GM investing big in EVs does make sense.
GM has instead signed a non-binding memorandum of understanding to supply Nikola with its Hydrotec fuel cell system. More business for GM. But GM will no longer build the Badger pickup truck for Nikola, essentially ending that program.
So it’s a bit hilarious to be a contrarian here, but I’m just going to spit it out. If you want to invest in electric cars but don’t want to be exposed to what looks like a massive bubble, there’s still a very good option available: General Motors. Some of the established automobile makers will also win big in the EV market of the future.
Not all stories from scratch are worth telling. But GM, being an American brand, still has some legs. When you are able to sell over 240,000 vehicles a month in the U.S. alone, you are doing something right already.
So why does investing in GM make sense now? It’s going to be one of the big winners of the green technology wave in the US in the 2020s. Here goes: GM’s plan involves launching 30 electric vehicles globally by 2025, with over two-thirds of those vehicles set to be available in North America.
All of GM’s major brands — Cadillac, GMC, Chevrolet and Buick — will have EV models available, and GM is promising options across the full spectrum of price points.
- It is targeting $1 million in global EV sales by 2025.
- It will spend more than $20 billion through 2025 on its next generation of all-electric and autonomous vehicles as it aims to gain a foothold in the fast-growing market for new auto technologies.
- So can a 110-year-old automaker compete with Tesla in the future? Time will tell, but I like this underdog story.
The main competition appears to be in battery technology, and GM has the deep pockets to be competitive here. Specfically, GM’s Ultium battery technology. The company has already achieved a nearly 40% reduction in battery pack costs compared to those in its Chevrolet Bolt EV, which launched a few years ago and found some success. The hope is GM’s next-generation Ultium batteries, expected to be available by mid-decade, will double the energy density of today’s batteries at half the cost.
In 2021, it will feel right to invest in GM’s chances in this ultra competitive future of EV vehicles. Will Cruise do okay? Who knows? It’s early to say. In October 2020, Consumer Reports concluded that GM’s Super Cruise system was at the top of the heap in its test of 17 systems. That’s a good sign.
GM could also gain more clients like the Nikola’s of the world. GM would engineer its Hydrotec fuel cell system to the specifications mutually agreed upon by both companies. It is expected that the potential arrangement would be “cost plus,” meaning that Nikola would pay upfront for the capital investment for the capacity.
GM’s investment in EVs and autonomous driving could actually allow it to become more of a technology platform and not just a manufacturer. This is its only hope to compete with Tesla, that has so much bling for your buck. Only the best Chinese startups are expected to be able to compete in the short term.
I would put a buy rating on GM if the stock was considerably below $35.00 and I would not be comfortable paying over $50 for it. Still, it has an off-chance of transitioning well to the future of vehicles. Everyone loves to underestimate Detroit-based GM.
But think of it this way: they have the finances to be able to invest in the tech. GM is profitable now, while other EV companies may never stop burning cash. GM produced over $4 billion of net income in the third quarter on $35.5 billion of revenue.
Compare that to, say, Nio, that almost went bankrupt. Chinese electric car maker NIO is now worth over $70 billion despite delivering just over 12,000 cars in the third quarter. It was a good buy at $2.00 though. You would get 25x returns. But GM deserves attention now as an EV stock, and to think anything different misses the potential of how the ecosystem changes.