The premise of this purchase is as follow:
- The general public is giving priority to companies that produce Electric Vehicles
- The valuation is extremely low, only 13 PE
- The competition (Tesla) had an extremely high valuation of 1,033 PE
- The US government is investing in charging stations
March 3, Could This Be One Of The Top Electric Vehicle Stocks For 2021?
General Motors is one of the legacy automakers benefiting from a shift from gas-powered to EV technology. With the news of GM’s new business unit, BrightDrop, they plan to sell electric vans and services to commercial delivery companies, disrupting the market for delivery logistics.
That’s not all its working on, either. In October, auto industry legend, GM announced that it’s majority-owned subsidiary, Cruise, has just received approval from the California DMV to test its autonomous vehicles without a driver. And while they’re not the first to receive such an approval, it’s still huge news for GM.
The company hopes to launch 30 electric vehicle models by 2025 and only sell zero-emissions vehicles by 2035. With the company’s focus on top of the line core lamination products, Ultium batteries, and self-driving technology, it appears that General Motors is moving in the right direction towards a more sustainable future.
Cruise CEO Dan Ammann wrote in a Medium post, “Before the end of the year, we’ll be sending cars out onto the streets of SF — without gasoline and without anyone at the wheel. Because safely removing the driver is the true benchmark of a self-driving car, and because burning fossil fuels is no way to build the future of transportation.”
March 3, GM extends production cuts due to chip shortage
The global semiconductor chip shortage led General Motors Co on Wednesday to extend production cuts at three North American plants and add a fourth to the list of factories hit, and Stellantis to warn the pain could linger far into the year.
The extended cuts do not change GM’s forecast last month that the shortage could shave up to $2 billion from this year’s earnings. GM Chief Financial Officer Paul Jacobson subsequently said chip supplies should return to normal rates by the second half of the year and he was confident the profit hit would not worsen.
However, Stellantis on Wednesday did not give an estimate for the financial hit it expects this year from the shortage and said the issue could last into the second half of 2021.
The chip shortage, which has hit automakers globally, stems from a confluence of factors as carmakers, which shut plants for two months during the COVID-19 pandemic last year, compete against the sprawling consumer electronics industry for chip supplies.
Consumers have stocked up on laptops, gaming consoles and other electronic products during the pandemic, leading to tight chip supplies. They also bought more cars than industry officials expected last spring, further straining supplies.
GM did not disclose the impact on volumes or say which supplier or parts were affected by the chip shortage, but the U.S. automaker said it intends to recover as much of the lost output as possible.
“GM continues to leverage every available semiconductor to build and ship our most popular and in-demand products, including full-size trucks and SUVs,” GM spokesman David Barnas said. “We contemplated this downtime when we discussed our outlook for 2021.”
GM said it would extend downtime at plants in Fairfax, Kansas, and Ingersoll, Ontario, to at least mid-April, and in San Luis Potosi, Mexico, through the end of March. In addition, it will idle its Gravatai plant in Sao Paulo, Brazil, in April and May.
The Detroit automaker had previously extended production cuts at three North American plants into mid-March and said vehicles at two other plants would only be partially built. Following Wednesday’s cuts, forecasting firm AutoForecast Solutions estimated GM could lose more than 216,000 units globally due to the shortage.
While reporting quarterly results on Wednesday, Stellantis said the chip shortage could weigh on 2021 earnings and Chief Financial Officer Richard Palmer told analysts on a conference call the financial impact was a “big unknown.”
Stellantis Chief Executive Carlos Tavares said the automaker was working hard to find alternative chip supplies, but he was “not so sure” the issue would be resolved by the second half of 2021.
Ford Motor Co said last month the lack of chips could cut company production by up to 20% in the first quarter and hurt profits by as much as $2.5 billion. It had previously cut production of its top-selling F-150 pickup truck.
Some automakers, including Toyota Motor Corp and Hyundai Motor Co, avoided deeper cuts by stockpiling chips ahead of the shortage.
Industry officials and politicians have pushed U.S. President Joe Biden’s administration to take a more active role in dealing with the chip shortage.
Last week, Biden said he would seek $37 billion in funding to supercharge chip manufacturing in the United States. An executive order also launched a review of supply chains for such critical products as semiconductor chips, electric vehicle batteries and rare earth minerals.
Complicating matters was a severe winter storm in Texas last month that killed at least 21 people and led to the shutdown of several chip plants. Semiconductor industry officials said customers would face knock-on effects in several months.
March 2, 2 Value Stocks That Could Easily Double
The internal combustion engine finally appears to be on its way out. While electric vehicles still account for a small portion of overall vehicle sales today, that’s almost guaranteed to change over the next decade. Tesla is an early leader, selling around half a million electric cars annually, but the traditional automakers shouldn’t be counted out.
General Motors plans to launch 30 electric vehicle models by 2025, and it hopes to only be selling zero-emissions vehicles by 2035. The company is banking on its Ultium battery technology to vastly lower battery pack costs and make the whole electric vehicle operation profitable.
GM is also aiming beyond passenger vehicles. The company recently announced BrightDrop, a new brand that will focus on electric delivery vehicles and related products and services. BrightDrop could eventually become a significant business for GM; it hit the ground running with FedEx as a major customer.
On top of GM’s electric vehicle ambitions, the company owns a majority stake in autonomous vehicle start-up Cruise, which was valued at $30 billion after its latest funding round. The long-term potential of autonomous vehicle technology is enormous, even if it takes a very long time for fully self-driving personal vehicles to become a reality. Autonomous tech should find applications in logistics and other commercial markets, and it may enable GM to offer subscription services that improve the company’s profitability.
The market is valuing GM stock at a steep discount to the broad market indices. GM expects to produce adjusted earnings per share between $4.50 and $5.25 in 2021, which puts the price-to-earnings ratio at roughly 10. That guidance includes the negative impact of the ongoing global semiconductor shortage, and the PE ratio doesn’t factor in GM’s stake in Cruise.
GM still needs to prove itself in the electric car market. But if the company can convince investors that it can smoothly make the transition away from gas-powered vehicles, a more optimistic valuation and a much higher stock price could be in GMs’ future.
Feb 25
Other U.S. automakers making a big push into EVs General Motors and Ford.