Since Tesla (NASDAQ:TSLA) shares have gone parabolic lately, I’ve seen comparatively little financial-press coverage surrounding General Motors (NYSE:GM), which has fallen toward the bottom of its medium-term price range. I won’t make many friends with this statement, but I believe it’s time to consider taking profits on high flyers like TSLA. And it’s time to rotate into a “boring” stocks like GM instead.
The price action in GM stock hasn’t been encouraging, but when it comes to General Motors itself, there’s really nothing boring about it.
In fact, I would argue that GM has done a good job of keeping up with its automotive-market peers. Furthermore, a relatively recent line of self-driving-vehicle offerings could garner this old company some new market share.
General Motors Cruising Into the Autonomous EV Market
Few folks in the financial press seemed to take notice in December 2019 when General Motors declared that most of the company’s Cadillacs will, by 2020’s end, be electrified. This big news since it shows that an automotive giant is taking direct aim at relative newcomer Tesla.
Now, with Cruise (which is majority owned by General Motors) set to release its audacious line of self-driving electric vehicles upon the public, the threat can no longer be ignored. If you thought Tesla’s vehicle designs are bold, dive a little deeper into Cruise. Cruise’s Origin has no pedals and no steering wheel and, according to GM, can be built “at roughly half the cost” of a traditional car.
Whether the public is ready for Cruise remains to be seen, but there’s little doubt in my mind that Cruise is ready for the public. As reported by Cruise Founder and Chief Technology Officer Kyle Vogt, Origin has undergone a million miles of testing last year in San Francisco. Vogt further asserts that Cruise’s vehicles could traverse the U.S. “without even a fender bender.” Add to that the fact that Origin is so spacious “you could probably do yoga” in the vehicle.
Clearly, there are plenty of reasons for the hype around Cruise.
A Driver of Innovation
Is this nothing more than Musk-like braggadocio? No.
I see Origin as filling a void in an underdeveloped and underappreciated market. In densely populated cities like San Francisco, I can’t imagine that the problem of congestion will get better anytime soon. As Cruise Chief Executive Dan Ammann put it, modern transportation is “broken.”
While we probably can’t stop big-city dwellers from traveling by road, businesses can at least strive to put more efficient and cleaner vehicles on the streets. Responding to the call for newer and better cars, Ammann claims that Origin offers “a better experience, at a lower price than what you paid to get around today.” Despite my incorrigible habit of ultra-skepticism, I agree with him on that.
I haven’t seen the final sticker price on the Origin, but affordability is pivotal to the mainstream success of self-driving electric vehicles. If Cruise puts a reasonable price tag on the car, then I could actually imagine this thing selling like hotcakes (or at least like Tesla cars). Designed for app-sharing-based rides in order to help reduce road congestion, all of the Origin’s seats face each other. This is “so you can have a conversation with family or friends,” according to Cruise.
Again, this will hopefully come with cost savings to the consumer. Again, echoing Ammann’s claims of a better experience and price, I would add that it’s a cost-efficient alternative to old-school gas guzzlers. “All told, the average San Franciscan household driving themselves or using ridesharing, will, on average, see up to $5,000 back in their pocket every year,” reports the Cruise chief executive.
The Takeaway on GM Stock
To be clear, I am not recommending that investors dump all of their TSLA shares and replace them with GM stock. Rather, I’m suggesting that you consider opening your mind to the possibility that an old dog like General Motors can learn a few new tricks. When it comes to the brave new world of next-gen vehicles, Musk and Co. aren’t the only game in town.
As of this writing, David Moadel did not hold a position in any of the aforementioned securities.
