Within a year or two, General Motors (NYSE:GM) is likely to benefit tremendously from the proliferation of electric vehicles (EVs) and its launch of semi-autonomous and autonomous vehicles. Those positive catalysts are likely to greatly boost GM’s results. Consequently, long-term investors should buy GM stock at its current, bargain-basement valuation to get in on the next age of mobility.
Starting next year, GM plans to eventually produce 12 new EVs, according to company documents obtained by a Seeking Alpha columnist. In the second half of 2021, the company intends to launch an electric version of its Hummer truck and an electric Cadillac SUV. By mid-2022, GM is looking to produce a second, “slightly smaller” Cadillac SUV. Over the subsequent two to three years, it intends to launch another nine electric vehicles, including a luxury sedan, an economy hatchback, and a driverless “robotaxi,” the columnist reported.
The relative success that GM has had with its Chevy Bolt EV bodes well for its ability to develop appealing electric vehicles in the future. In 2019, the Bolt was the third-most popular EV, trailing only Tesla’s (NASDAQ:TSLA) Model 3 and Model X vehicles. Although only 16,400 Bolts were sold in 2019, tremendously trailing the 154,500 Model 3s that were sold, the fact that the Bolt beat out so many other EVs suggests that GM will more than hold its own as overall EV sales gain momentum.
Over the long-term, EV sales will almost definitely surge overseas because both the EU and China are pushing for a meaningful percentage of the vehicles sold over the long-term in their territories to be electric powered.
Specifically, China wants EVs and other “new-energy” vehicles to make up more than 20% of its total auto sales by 2025. And the EU set very tough new emission requirements that look poised to effectively force automakers to ensure that EVs account for a high percentage of the vehicles sold. Germany-based auto analyst Matt Schmidt expects sales of EVs to more than double this year to 700,000 before closing in on 1 million in 2021, Forbes reported at the end of December.
Meanwhile Credit Suisse analysts Dan Levy and Robert Moon wrote earlier this week that “sees GM as one of the best positioned legacy (automakers) amid the transition to an EV world.”
Poised to Benefit From Driving Autonomy
My recent review of stocks poised to benefit from the advent of autonomous vehicles, I wrote that vehicles with more limited autonomy have already begun to emerge in the U.S., and will become quite widespread by the fourth quarter.
“Among the vehicles in this category will be those with highly advanced driver-assistance systems, driverless cars or trucks used by companies to transport objects along fixed routes, and driverless cars used to transport people along fixed routes. But towards the end of the year, I think the positive impact of much more widespread, truly autonomous vehicles will start to be reflected by multiple stocks.”
GM is well-positioned to benefit from all those trends. Its Cruise unit is generally considered one of the leaders in self-driving technology, as shown by high ratings from research firm Navigant and the huge $19 billion valuation that it received during a fundraising round last year. Cruise has unveiled a self-driving vehicle, and it is testing self-driving vehicles in San Francisco. Further, the unit reportedly indicated that it plans to launch robotaxis — autonomous versions of Uber (NYSE:UBER) and Lyft’s (NASDAQ:LYFT) services — in 2021.
Since GM will not have to pay any humans to operate these robotaxis, they should be extremely profitable for the company. Further, GM plans to incorporate its semi-autonomous advanced driver assist (ADAS) system, Super Cruise, in three vehicles in the second half of this year, in 10 vehicles next year and in 22 vehicles by 2023. The addition of the ADAS system to many more of the company’s vehicles should meaningfully boost its sales and profits, lifting GM stock in the process.
In late 2018, GM launched a restructuring initiative that has cut its costs. That should boost its profitability going forward. Further, the U.S.-Canada trade deal and China’s agreement to import more cars from the U.S. should also be positive for GM.
Bottom Line on GM Stock
GM’s strong capabilities when it comes to EVs and driving autonomy leaves GM stock well-positioned to outperform over the long-term. I believe that the low valuation of GM stock, which has a trailing price-earnings ratio of just 7, has left the shares extremely undervalued.
As of this writing, Larry Ramer did not own shares of any of the aforementioned companies. Larry Ramer has conducted research and written articles on U.S. stocks for 13 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been GE, solar stocks, and Snap. You can reach him on StockTwits at @larryramer.