Electric vehicles (EVs) are hitting the right note with investors. With EV euphoria getting hotter by the day, investors are intrigued about automakers that are fast changing their gears to electric. Shares of EV pure plays including Tesla TSLA, NIO Inc. NIO and Workhorse Group WKHS are witnessing meteoric rise.
Many industry watchers are of the view that these stocks have rallied far beyond a reasonable price and entered the bubble territory. Investors are only betting on EV stocks based on the current hype and promise but are overlooking the companies’ fundamentals.
Considering the lofty valuations of the aforementioned EV makers, any sharp pullback in the share price of those stocks won’t be much of a surprise. However, the one stock that will survive the EV mania and make the most of this e-mobility revolution is the U.S. auto giant General Motors GM.
General Motors is pulling out all the stops to demonstrate its EV efficiency. It adopted an “all-in” electrification strategy, whereby it will gain a competitive edge in batteries, software, vehicle integration, manufacturing and customer experience to make EVs the key catalyst for boosting the company’s profitability.
Unlike the majority of high-flying EV stocks, General Motors doesn’t seem pricey and is the apt pick for a value investor. Its current EV/EBITDA ratio stands at 8.18X, way lower than the industry’s 39.5X.
General Motors also boasts balance-sheet strength with high liquidity. While most of the EV stocks are burning cash and incurring losses, General Motors stands out as a profitable firm. It generated third-quarter 2020 income of $4 billion on revenues of $35.5 billion.
The firm displays an impressive earnings surprise history with its bottom linesurpassing estimates in each of the trailing four quarters.
Over the past 30 days, the Zacks Consensus Estimate for 2020 earnings has risen from $2.64 per share all the way to $4.37. The earnings estimate for 2021 has increased 22.7% to $5.51 per share over the same time frame, indicating year over year growth of 26.2%.
GM on a Spree to Revolutionize the EV Space
General Motors is focused on providing a complete carbon-free transportation in the upcoming years and is driving its electrification efforts to reach the target.
Supported by President-elect Joe Biden’s emphasis on EVs, General Motors pulled out of Trump’s lawsuit against California over fuel economy standards. Moreover, the company urged other automakers including Toyota and Fiat Chrysler to back out from Trump’s legal attack on California’s clean vehicles program.
In October, General Motors announced its decision to spend around $2 billion for the makeover of its Tennessee facilityto develop green vehicles. This will be the company’s third factory, the other two being Factory Zero and Orion Assembly plants.
Let’s delve deeper into the firm’s aggressive electrification strides.
General Motors’ own modular battery platform Ultium Drive system will aid the company to transition to an all-electric portfolio down the road. The company’s next-generation EVs (from small cars to pickups) will be powered by Ultium Drive, a system of drive units and electric motors.
Rather than outsourcing EV parts, the company looks to develop and produce the components in-house, which will not only augment its manufacturing efficiencies but also improve the range and performance of its upcoming vehicles. By 2025, the cost of Ultium battery packs is expected to decline 60% along with doubling the energy density and raising the range to 450 miles on a single recharge.
General Motors seems to be going all out to embrace an electric future and gain a strong foothold in the fast-growing market. At the Barclays Global Automotive Conference held last month, CEO Mary Barra declared that the company boosted its electric and driverless investment to $27 billion through 2025 from the $20 billion budget stipulated before the COVID-19 pandemic.
Impressive Vehicle Line-up & Ambitious Launch Target: By 2025, General Motors plans to roll out 30 electric vehicles globally, more than two-thirds of which will be available in North America.
The vehicles will encompass the company’s entire brand portfolio including Cadillac, Buick, GMC and Chevrolet in varying prices. Among the first EVs to be unveiled by the auto giant, the GMC Hummer all-electric pickup and the Cadillac Lyriq SUV are scheduled to go on sale in late 2021 andduring the first quarter of 2022, respectively.
Strategic Alliances to Step Up EV Development: In September, General Motors inked a deal with Honda, under which the firms will work toward developing electric as well as petroleum-powered vehicle, advanced driver assist systems and vehicle-to-everything communication.
This new tie-up gains further momentum from the agreement reached between the companies in April to co-build two new all electric Honda vehicles based on General Motors’ Ultium battery-powered EV platform.In a bid to bolster its EV adoption, General Motors also teamed up with EVgo to build more than 2,700 new fast chargers over the next five years in the United States of America.
General Motors commands a huge presence in China, which is the biggest EV market in the world. The company strengthened its line-up in China with Hong Guang Mini EV, which was launched in July under the company’s Wuling brand.
Importantly, through months ended Oct 30, Hong Guang outsold Tesla’s Model 3 in China, thereby becoming the best-selling electric car in the world’s largest auto market. Per China Passenger Car Association, Hong Guang notched up 55,781 units in sales compared with Model 3’s 35,283 sales. Hong Guang’s instant popularity braces the Wuling brand to bank on the widespread EV uptake.
Notably, General Motors plans to launch more than 40% of its manufacturing as green vehicles in China within the next five years.
While Tesla and other upstart EV competitors grabbed huge attention lately, investors should note that General Motors is a legacy automaker with more than 100 years of experience.
This trusted company with well-established brands has the scale to make a big splash in the future EV market. The company currently has a Zacks Rank #1 (Strong Buy) and a VGM Score of B.
It is reasonably priced.So get your hands on the stock right now for handsome long-term profits.