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Mary Barra, CEO of General Motors Co., and the GM board of directors have crossed the tipping point in their commitment to a fully electric future, an initiative announced three years ago. In 2017, GM showed flexibility to develop battery-electric vehicles and to replace its gasoline models at a pace consistent with market and regulatory conditions. The initial investment of $ 20 billion was significant; it also provided a pivot if events and consumer tastes slowed the entry of electric vehicles.
Ultium battery architecture Source: GM
Starting this week, GM signals with a sharp increase in investment that it is “all in” and is accelerating the switchover to ensure leadership in fossil-free mobility. It has to catch up with Tesla (TSLA) and Volkswagen AG (OTCPK: VWAGY), which currently lead in electric vehicles.
Barra’s goal is simple and straightforward: to put every GM customer in an EV.
The uncertain future of gasoline
With California and Britain, with the latest governments announcing plans to ban the sale of gasoline vehicles within a decade, GM has bet its future on much faster adoption of electric vehicles by consumers from of the current low rate. The defeat of Donald Trump is another benefit for electric vehicles, making his intention to overturn California’s exemption from federal clean air standards; the exemption paved the way for the state’s redefinition of CO2 as a pollutant, the justification for a zero-emission vehicle mandate.
As Democrats are set to take over the White House, including the Environmental Protection Agency, the auto industry will surely face tougher fuel efficiency standards whose ultimate goal is to accelerate the replacement of gasoline by electricity.
2022 GMC Hummer EV Source: GM
For GM, the migration to electric vehicles is also an attempt to attract investors, who so far remain cautious about its stock, which for a decade has underperformed the market as a whole. Barra and the GM board can only look with envy on electric vehicle maker Tesla, a much smaller and barely profitable company with a market capitalization eight times that of GM. I imagine GM executives and directors first asked themselves, “Can Tesla investors really be so ignorant?” Over time, they came to the idea that the future of electric vehicles articulated by Tesla’s Elon Musk now seems much closer to reality and should happen sooner than GM previously assumed.
This week at the Barclays Global Automotive Conference, Barra said the benefits of GM’s size, scale, experience and expertise “are changing the way customers and investors view our business. This is how we will win, ”she said.
GM’s EV program is bold and the resources it brings are tremendous. The key question for investors, of course, is – beyond the timing of adopting EVs – whether GM can execute the strategies it sets out. Having filed for bankruptcy in 2009 and reorganized with funding from the U.S. Treasury, GM – with all the advantages it has over EV startups, including significant cash flow – has yet to overcome legitimate doubts and skepticism about the fact that its corporate culture has evolved from a culture of convenience. to another like the driven, tenacious and win-win mentality of Tesla and other young tech start-ups. Barra’s program, of course, is nothing if not ambitious; and she said explicitly – and demonstrated through actions – that this is not the same business that failed in 2009.
Alternative bets on electric vehicles
Another question for those who are considering a flyer at GM: other EV startups offer the opportunity to bet on technology. For example: Chinese electric vehicle maker Nio Inc. sells nearly $ 50 per share, which has a market cap of $ 67 billion. In May, Nio’s shares were selling for around $ 4.
GM’s only electric vehicle offering in the United States so far is the compact Chevrolet Bolt EV, which sold 14,053 in the third quarter, up from 13,111 in the same period a year ago. These are tiny numbers. According to Kelley Blue Book, electric vehicles have captured 1.6% of the U.S. vehicle market so far this year. But in China, working with venture capital partner Wuling, a $ 4,300 GM electric vehicle called the Hongguang Mini outclasses Tesla’s Model 3 and is the market leader. Mini, which has a range of 105 miles and a top speed of 62 mph, recorded sales of over 55,000 through October 31, putting it ahead of Tesla’s Model 3 sedan.
In addition to the 30 EV models that GM has announced it will bring to the world by the middle of this decade, the automaker has said its Ultium battery system will transition from its current chemistry to a new chemistry it doesn’t not described, which will reduce the cost. and increase the potential range of a fully charged electric vehicle to 450 miles from the current maximum of 400 miles. The new lineup is impressive, because it – along with the construction of more charging stations – could allay the concern of some motorists that electric vehicles won’t offer the same convenience for traveling long distances as gasoline-powered cars.
New EV models by 2022
By the first quarter of 2022, GM said, it will introduce the GMC Hummer EV, a super premium pickup truck costing $ 111,000 and the Cadillac Lyriq SUV, the brand’s first electric vehicle. This week, published reports said GM was offering sums of up to $ 500,000 to Cadillac dealers who do not want to sell electric vehicles to forgo their franchise.
GM’s first two EV models to be built on the Ultium battery platform are just over a year old. They will provide insight into how GM assesses the market and in particular customer tastes for a new technology.
GM will share its EV technology with Honda Motor Co. (HMC), which will begin building two EV models using Ultium battery architecture starting in model year 2024. A proposed share with start-up Nikola (NKLA) n ‘has not been finalized and could collapse – GM is not disclosing details pending the Dec. 3 deadline for closing the deal.
Until then, GM stock at current prices isn’t too risky, as Barra has already hinted that the automaker will consider a restoration of its dividend by spring – an event that can already be factored into the price of the car. ‘action. In the longer term, GM has cast its spell on the presumption of a future EV that will define global mobility, and that it will dominate along with a few other players. If GM is correct on both counts – something that will not be known for a few years – now is the right time and the right price to dig deeper into the stock.
Check out Auto / Mobility Investors and my regular reports to stay up to date with EVs.
Disclosure: I / we have no positions in the mentioned stocks, and I do not intend to initiate any positions within the next 72 hours. I wrote this article myself and it expresses my own opinions. I am not receiving any compensation for this (other than from Seeking Alpha). I have no business relationship with a company whose stock is mentioned in this article.
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