Less than a year ago, General Motors CEO Mary Barra looked like a genius. Wall Street believed she had discovered the secret to transforming the manufacturer from an ungainly fossil fuel-dependent company to one that would move to the forefront of the electric car market. At that point, GM was viewed as a potential rival to Tesla. However, it was joined in that effort by every other large car company in the world.
GM’s shares have dropped an extraordinarily awful 21% this year, according to Yahoo Finance. Over the same period, Tesla’s stock has risen 4.5%, even as tech stocks have been hammered. Tesla’s market cap is $1.4 trillion. GM’s is $67 billion.
GM’s recent earnings were decent. However, Barron’s pointed out, “Morgan Stanley analyst Adam Jonas has concerns about GM’s ability to transition to an all-electric future.” Jonas downgraded GM’s shares from Buy to Hold.
GM’s trouble is that it, like most other legacy car companies, it has announced a formula to make the transition to electric and autonomous vehicles. However, as Tesla’s sales rose worldwide, GM has trouble selling even a modest number of electric vehicles (EVs). Additionally, GM’s chip shortage (which also has plagued most of the industry) has slowed sales. For some reason, the markets believe Tesla has done a better job managing its supply line. Its next earnings report will show if that assumption is true.
Last June, GM announced it would invest $35 billion from 2020 to 2025 to increase its EV and autonomous car and truck lineup. At the time Barra said, “We are investing aggressively in a comprehensive and highly-integrated plan to make sure that GM leads in all aspects of the transformation to a more sustainable future.”
GM’s hurdle is that very few people may want its EVs, no matter how well it does in designing and marketing them. It faces a sea of competition, led by Tesla, which has a head start of several years, both in sales and technology.
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