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MarketScreener Homepage  >  Equities  >  Nyse  >  General Motors Company    GM


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GM Upgrades Bet on EVs as Investors Swoon For Electric Cars--3rd Update

11/19/2020 | 05:27pm EST

By Mike Colias

General Motors Co. is raising its bet on electric cars by more than a third, as it hustles to convince a skeptical Wall Street that it too can be successful in the nascent market.

The nation's biggest auto maker by sales said Thursday it would spend $27 billion through 2025 to develop electric and driverless vehicles. That is up from a $20 billion figure that GM pegged in March, days before the Covid-19 pandemic forced the industry to shut its North American factories and touched off an industrywide cash crisis.

Electric vehicles today account for only about 2% of global sales for GM and the broader industry. But with governments from Beijing to California seeking to clamp down on tailpipe emissions -- along with the spectacular rise in valuations for green-car companies such as Tesla Inc. -- traditional auto makers are racing for an inside edge in what investors see as the auto sector's next big growth opportunity.

"We want to lead in this space," GM product-development chief Doug Parks said during a media briefing. "Tesla's got a good jump, and they've done great things. There's a lot of startups, and everyone else invading the space."

Speaking at a Barclays investor conference Thursday, GM Chief Executive Mary Barra said the company has the scale in areas like manufacturing and sales to eventually overtake Tesla as the leader in electric-vehicle sales in North America.

"We've developed these assets and capabilities over decades. They are real, competitive, innovative strengths that startups will struggle to match," Ms. Barra said.

But so far, GM and other legacy auto makers have been largely ignored amid a frenzy of electric-vehicle investment.

Tesla's shares have leapt roughly sixfold this year as investors cheer its sales growth in China and budding revenue growth from selling connected-car services. Little-known Chinese startup Nio Inc. -- which in April needed a roughly $1 billion infusion from Chinese state investors amid mounting losses -- has seen its valuation rocket to about $65 billion in recent months, just beyond that of GM.

Meanwhile, a slew of green-energy vehicle startups have had stellar debuts after being taken public this year through blank-check companies, including Hyliion Inc. and Fisker Inc.

GM shares have more than doubled since cratering in March during the factory shutdowns, but its stock price, along with many other auto companies, has lagged behind the broader market for years, even as electric-vehicle newcomers have seen shares jump.

Analysts have lauded GM's technology and commitment to growing its plug-in-car business. But, they say investors are more enticed by pure-play electric vehicle companies that come without the lower-margin, capital-intensive aspects of traditional car companies, including vast factory footprints and unionized workforces.

Some analysts have suggested GM spin off its electric-vehicle business to boost the share price. Ms. Barra has said she is open to changes in GM's capital structure that would reward shareholders, but wouldn't make a move simply to get a short-term pop in valuation.

Speaking at a Barclays investor conference Thursday, Ms. Barra said GM has the scale in areas like manufacturing and sales to eventually overtake Tesla as the leader in electric-vehicle sales in North America.

"We've developed these assets and capabilities over decades. They are real, competitive, innovative strengths that startups will struggle to match," Ms. Barra said.

Tighter regulations on tailpipe emissions in Europe and China also are pressuring auto makers to offer greener vehicle lineups. The European Union's stricter rules on carbon-dioxide emissions have many auto makers there facing the prospect of paying billions of dollars in fines. Some states and countries have imposed future bans on gas- and diesel-powered vehicles, including the 2035 deadline recently set by California.

Investors are paying especially close attention to auto makers' capital-spending plans for signs of substantial bets on future technologies that could drive growth. This week, analysts at UBS said they favored GM shares over Ford Motor Co.'s, in part because Ford isn't spending as much as its rival on electric-vehicle development.

"An 'all-in' EV strategy is a prerequisite to avoid a further de-rating of shares," UBS analyst Patrick Hummel wrote in a research note.

A Ford spokesman pointed to past statements from Chief Executive Jim Farley, who is focusing on electric versions of vehicles that commercial customers use in their businesses, including a battery-powered Transit cargo van Ford revealed last week. Ford has said it is spending $11.5 billion on electric vehicles over a five-year period ending in 2022.

"We expect demand for capable, productive and affordable electric commercial vehicles, for example, to be massive," the spokesman said.

Volkswagen AG, which is making among the industry's largest investments in electric cars, this week said it would increase its spending to about $41 billion through mid-decade, 6% higher than an earlier target. The German auto giant said about half of its overall capital spending during that period will go toward future technologies, which include electric cars, more-advanced factories and self-driving vehicles.

Electric vehicles underpin Ms. Barra's growth strategy. During her seven-year tenure, she has pulled GM out of Europe and many other international markets, redirecting capital toward electric and driverless cars and other technologies.

GM's new spending target represents more than half of its planned capital expenditures through mid-decade. Electric vehicles generally have been money losers for car companies because of their high battery costs, although GM has said its next generation of electric vehicles will be profitable.

The auto maker projected Thursday that the cost of the battery pack for its plug-in vehicles in 2025 will be about 60% lower than the one used in its lone U.S. electric car today, the Chevrolet Bolt. Mr. Parks also said GM is working to get some electric models to market earlier than initially planned, including a Cadillac SUV, the Lyriq, which will hit showrooms by early 2022, nine months ahead of schedule, Mr. Parks said.

GM said 40% of the vehicles it will sell in the U.S. by mid-decade will be fully electric. Early entries will be expensive -- including a Hummer pickup truck that will be priced around $113,000 when it goes on sale late next year -- but GM plans to add more-affordable models over time, including some that will sell in the low-$30,000 range, Mr. Parks said.

Write to Mike Colias at Mike.Colias@wsj.com

(END) Dow Jones Newswires

11-19-20 1726ET

Stocks mentioned in the article
ChangeLast1st jan.
BARCLAYS PLC -1.20% 143.06 Delayed Quote.-2.47%
FORD MOTOR COMPANY -0.09% 11.52 Delayed Quote.31.06%
GENERAL MOTORS COMPANY 0.58% 55.4 Delayed Quote.33.05%
NIO LIMITED 6.19% 61.95 Delayed Quote.27.10%
TESLA, INC. 0.20% 846.64 Delayed Quote.19.98%
UBS GROUP AG -0.68% 13.15 Delayed Quote.5.45%
VOLKSWAGEN AG 1.88% 165.08 Delayed Quote.8.31%
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Financials (USD)
Sales 2020 120 B - -
Net income 2020 5 731 M - -
Net cash 2020 6 160 M - -
P/E ratio 2020 13,8x
Yield 2020 0,71%
Capitalization 79 294 M 79 294 M -
EV / Sales 2020 0,61x
EV / Sales 2021 0,52x
Nbr of Employees 164 000
Free-Float 95,0%
Duration : Period :
General Motors Company Technical Analysis Chart | MarketScreener
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Technical analysis trends GENERAL MOTORS COMPANY
Short TermMid-TermLong Term
Income Statement Evolution
Mean consensus OUTPERFORM
Number of Analysts 19
Average target price 57,24 $
Last Close Price 55,40 $
Spread / Highest target 30,0%
Spread / Average Target 3,31%
Spread / Lowest Target -22,4%
EPS Revisions
Managers and Directors
Mary Teresa Barra Chairman & Chief Executive Officer
Mark L. Reuss President
Paul A. Jacobson Chief Financial Officer & Executive Vice President
Randall D. Mott Chief Information Officer
Matthew Tsien Chief Technology Officer & Executive VP
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1st jan.Capitalization (M$)
VOLKSWAGEN AG8.31%105 915
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BMW AG-1.36%55 971