GM Upgrades Bet on EVs as Investors Swoon For Electric Cars
November 19 2020 - 01:39PM
Dow Jones News
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 that it
will 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.
GM's new spending target represents more than half of its
planned capital expenditures through mid-decade, even though
electric and driverless vehicles today account for around 2% of the
company's global sales, roughly mirroring the broader market.
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 cars will be profitable.
Traditional auto makers are racing for an inside edge in what
investors see as the auto sector's next big growth opportunity. The
soaring share prices of Tesla Inc., China's Nio Inc. and other
young companies with pure-electric portfolios has added to the
sense of urgency.
"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."
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 Nio -- which in April
needed a roughly $1 billion infusion from Chinese state investors
amid mounting losses -- has seen its valuation rocket to $63
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 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 work
forces.
Some analysts have suggested GM spin off its electric-vehicle
business to boost the share price. Chief Executive Mary Barra has
said she is open to changes in GM's capital structure that would
reward shareholders, but will not make a move simply to get a
short-term pop in valuation.
(More to come)
(END) Dow Jones Newswires
November 19, 2020 13:24 ET (18:24 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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