Tesla is on track to hit $ 400 billion in sales. Thanks GM.

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Electric vehicles are winning.

Traditional automakers are banking on electric vehicles, spending billions to develop models and build battery factories. They are all, essentially, in pursuit

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(ticker: TSLA).

Wednesday,

General Motors

(GM) presented plans to double annual sales by 2030. Electric vehicles play a huge role. By then, GM wants to own the major share of electric vehicles and sell $ 90 billion worth of electric vehicles that year.

If GM is successful, its inventory should skyrocket. But if GM hits its mark, then Tesla should be, frankly, a huge company by then as well. Here is the math.

GM estimates that 40 to 50% of new car sales in the United States in 2030 will be fully electric. This will represent, perhaps, 10 million electric vehicles sold. With normal inflation, that will represent roughly $ 500 billion in electric vehicle sales in the United States.

Total car sales in the United States in 2030 could reach $ 900 billion. Car sales in the United States exceeded $ 460 billion before the 2019 pandemic. The average annual growth rate implied by this forecast is around 6%. It makes sense. The average price of cars is increasing by around 4% per year and the volumes of cars are increasing as the country grows – there are more drivers. However, all of these figures are only approximations.

Thus, GM plans to have about 18% of the electric vehicle market share in the United States by the end of the decade. Tesla now has more than 60% market share in the United States. If Tesla manages to maintain its market share, it can generate, perhaps, $ 100 billion in sales in the United States by selling around 2 million units.

Tesla, however, generates more of its sales overseas. Europe and China have been faster to adopt electric vehicles. If Tesla generates $ 100 billion in sales in the United States, total sales of electric vehicles are expected to exceed $ 250 billion.

There is another factor to consider with an automaker: size.

GM’s strategy to double sales is based on transforming GM into a platform company with multiple revenue lines. It’s also a bit like Tesla. Elon Musk’s company sells insurance, software subscriptions for autonomous car features, stationary electricity for residential consumers and utilities, and solar rooftops, not to mention that Tesla has a network of charging stations. recharge.

GM wants to generate roughly $ 80 billion or $ 90 billion from its new ancillary businesses, including insurance and self-driving cars, among others. This represents around 30% of the company’s annual 2030 target. Tesla does a little more than GM, so if Tesla’s income statement is similar, in terms of revenue mix, Tesla could generate 40% of its sales from other lines and generate around $ 400 billion to $ 420 billion in revenue. sales.

Tesla is expected to generate around $ 50 billion in sales in 2021. If that calculation is close, Tesla’s average annual sales growth will be around 26% per year by then.

Not bad.

Wall Street’s furthest figure for Tesla’s sales estimates is around 2026. That year, analysts predict revenue of around $ 140 billion. This is a growth rate, between 2021 and 2026, of approximately 23% per year. It’s probably a little weak, however.

Longer-term estimates for analysts are unreliable. Also, not everyone publishes long-term forecasts. The number of analysts projecting long-term earnings is less than the total number of analysts covering the stock. Most analysts devote most of their energy to one- or two-year sales estimates, even when they expect growth to continue into the future.

Looking ahead, what investors need to ask is if GM’s vision for the future is correct, what does this mean for all auto stocks.

GM, of course, is not valued as a growth stock. It trades for less than 8 times the estimated profit in 2022. Tesla trades around 100 times that amount.

Given this valuation gap, investors are not yet sure what to think of GM’s vision.

GM stock is up about 4% in Thursday trading. The

S&P 500
and

Dow Jones Industrial Average
are up about 1.5% and 1.6%, respectively. Tesla shares added 0.5%.

Write to Al Root at [email protected]