These days, it seems like everyone wants a piece of the global EV (Electric Vehicles
) market. With the cost of electric vehicle ownership decreasing and manufacturers working hard to create new and exciting tech that powers these eco-friendly automobiles, the potential for companies involved in the EV industry is undeniable. You also have major financial incentives and policies that encourage the growth of EV adoption which should accelerate the growth of the industry in the coming years. In fact, according to Deloitte
approximately 20 major cities worldwide have announced plans to ban gasoline and diesel cars by 2030 or sooner.
All of this equates to huge profit potential for stocks that are directly involved in EV. We’ve already seen the demand reflected in the share prices of companies like Tesla (NASDAQ:TSLA). Even the old guard in the automotive industry is making moves to gain exposure to the EV market. For example, General Motors (NYSE:GM) is shifting its strategy towards creating all-electric models in 3 major ways and plans to spend $20 billion on electric and autonomous vehicle developments through 2025. Let’s take a look at what General Motors is up to below and decide whether or not the stock is worth buying.
New Electric Vehicle Models
Shares of General Motors have pretty much been stuck in neutral for a while now, which could be a big reason why it is working hard to develop new electric vehicle models. The company plans to deliver 20 new electric vehicles by 2023 featuring its own proprietary designs. This could be great news for long-time shareholders and help the company make a dent in Tesla’s market share.
First, GM is launching an all-electric Cadillac SUV, the Lyriq. The company plans to launch the Lyriq in China and then move it into U.S. showrooms in late 2022. Combining a luxury brand with EV tech could be a win for a company that desperately needs one. There’s also the recently announced EV Hummer Super Truck which is the company’s first foray into electric trucks. The new Hummer models feature GM’s Ultium battery system and reportedly features a “crab mode” that allows the car to rotate all four of its wheels at once and move in a diagonal direction. These are exciting new products that could take GM into a new era but don’t forget about the Chevrolet Volt, GM’s plug-in hybrid car that never really took off.
Investing in Battery Technology
We mentioned that GM is spending big on electric vehicles and the tech that powers them, and perhaps the most intriguing action that the legacy automaker has taken is to invest in its own proprietary electric battery. Ultium is a lithium-ion battery that could potentially rival Tesla’s by providing engineering flexibility and reducing battery cell costs to under $100 per kilowatt-hour.
GM is moving quickly to shift towards EV production and has completely revamped its idled Detroit factory specifically for manufacturing electric vehicles. The company also entered a joint venture with Korea’s LG Chem to create a $2.3 billion “gigafactory” in Ohio for mass-producing its Ultium batteries. These are big moves that are certainly exciting for GM shareholders, but we still need to see just how much demand there is for GM’s new technology and whether or not they can actually rival the efficiency of Tesla’s batteries.
Nikola Motors Deal
Another way that GM is targeting the EV market is with the company’s low-risk partnership deal with Nikola Motors (NASDAQ:NKLA). General Motors is taking a $2 billion stake in Nikola and will be helping the company to develop its vehicles with GM’s technology including its Ultium batteries. GM isn’t paying for the shares with cash, but rather with in-kind services and licenses. Basically, General Motors will be developing and manufacturing the Nikola Badger truck. Nikola will pay GM up to $700 million to cover the cost of building manufacturing capacity for the trucks and GM also gets 80% of the electric vehicle regulatory credits.
While you don’t necessarily have to be a believer in Nikola Motors to like GM stock going forward, the fact that the company is ambitiously exploring new outlets to gain exposure to the EV market tells us that GM is very serious about executing its vision.
Is GM Stock a Buy?
General Motors is revving up its EV exposure and could end up being a major player in the industry going forward. While the stock does look undervalued at this time and pays a nice dividend, there are risks related to a prolonged recession, the actual demand for GM’s EV automobiles, and the potential for production delays. Investors might want to wait for more clarity before adding shares of GM, but the stock is definitely worth watching going forward.
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