General Motors takes on upstart electric vehicle stocks
Stocks
June 17, 2021
On June 16, it was reported that General Motors plans to ramp up its electric vehicle (EV) and autonomous vehicle investment by 30% over the next 4 years.
What’s the big deal? 2020 was all about upstart EV makers like Tesla, NIO and Nikola. 2021 put the focus back on the old car souls like GM, Ford and Volkswagen.
- These carmakers ramped up their electric investments with plans to shift the majority of productions to EVs in the next decade.
- In 2021, these old car stocks returned an average of 67% compared to an average loss of 17% between Tesla and NIO.
Electric vehicles are estimated to account for 58% of total vehicle sales by 2040 and traditional carmakers are in the best position to benefit.
- They’ve got big advantages over new upstarts — a head start in manufacturing, established dealerships and cash (lots of it).
- For General Motors, who made over $6b of net income in 2020, ramping up its EV investment isn’t an issue.
But when you’re an electric vehicle startup, cash gets a lot tighter. That was the case for Lordstown Motors (NASDAQ:RIDE), an EV truck maker with zero revenue. On June 8, RIDE warned investors of bankruptcy concerns — with its CEO/CFO resigning in the following week.
The Joe’s take: At a 10x P/E (ELI5: Price-to-earning ratio) and 0.6x price-to-sales multiple, General Motors’ stock is looking much cheaper compared to other EV stocks. In comparison, Tesla trades at an 11x price-to-sales multiple.
- If investors were to value GM’s company like an EV maker, its stock could rise.
- For GM to trade like an EV stock, investors will have to see more results/traction while buying into their electric story.
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