General Motors (NYSE:GM)
General Motors (NYSE:GM) announced a share repurchase and dividend reinstatement after seeing its stock price drop by nearly 36% this year. The company yields under 1 percent thanks to the quarterly dividend of $0.09 and the annual payout of $0.36 that investors in GM will receive. In addition, the company may repurchase up to $5 billion in stock.
The stock price appears to have been boosted by these actions, as it has risen from a 52-week low of $30.33 to a current level of roughly $40. It’s still below the 52-week high of $67.21, though. Where could GM go from here? What is it?
Expansive product strategy
General Motors (NYSE:GM) strong ambitions for electric vehicles (EVs) should help it maintain its position as the industry leader. Ultium EV is the foundation of GM’s EV strategy, powering the GMC Hummer EV truck, SUV, and Chevrolet Silverado EV. It will also serve as the foundation for the 2023 Chevrolet Equinox EV and the 2023 Chevrolet Blazer EV.
Recent price reductions by General Motors (NYSE:GM) have made the Bolt EV and Bolt EV EUV the least cost electric vehicles (EVs) in the U.S. market, respectively, by $5,900 and $6,300. However, both Bolt models rely on GM’s EV technology in their earlier iterations.
The 2023 Lyriq EV is Cadillac’s first attempt at the electric vehicle market, and orders are now being taken. Soon after, at some point indeterminate, the Cadillac Celestiq, the company’s flagship electric vehicle, will join the lineup. Buick, not wanting to be left behind, will introduce its first electric vehicle (EV) to the North American market in 2024.
General Motors (NYSE:GM) plans to recoup its $35 billion investment by 2025 by selling 30 different electrified vehicle models worldwide at a combined annual volume of more than 1 million vehicles.
General Motors (NYSE:GM) commitment to an all-electric vehicle (EV) strategy stands in stark contrast to that of its competitors, most notably Ford Motor (F -0.20%), which is taking a multi-pronged approach to electrification by offering a mix of hybrid, plug-in hybrid, and EV models. Ford is less of a pure EV play than competitors like Tesla and General Motors because it also produces hybrid vehicles like the Ford Maverick and the Escape, in addition to the all-electric Mustang Mach-E, F-150 Lightning, and E-Transit Van. Ford is splitting its EV unit from its legacy combustion engine firm and planning to spend $50 billion on EVs through 2026.
To compete with pure EV plays like Tesla (NASDAQ:TSLA) and Rivian (NASDAQ:RIVN), GM appears to have a superior product plan, transitioning into a pure EV company with more EVs than its competitors. Its autonomous driving technology, Super Cruise, will be available on 22 vehicles by 2023, just like those two companies have.
Even though the National Highway Traffic Safety Administration is conducting dozens of investigations into Tesla’s Autopilot autonomous driving system, it remains the company’s main competition. BlueCruise is Ford’s semi-autonomous driving system, although it isn’t as sophisticated as the alternatives.
It was also reported that General Motors (NYSE:GM) and Cruise, a firm that GM owns 80% of, would launch the first commercial self-driving taxi service in a major city, San Francisco. GM’s goal for its Cruise line of vehicles is $50 billion in sales by 2027.
Problems and plans for batteries
Except for Tesla, General Motors (NYSE:GM) vertically integrated battery strategy stands out from the crowd.
With $2.5 billion in loans from the U.S. Department of Energy to help finance the construction, Ultium Cells LLC, a joint venture between GM and LG Energy Solutions, plans to build four battery factories in Ohio, Tennessee, Michigan, and Indiana. This should make it easier for GM EVs to comply with the government’s amended local sourcing criterion for federal tax credit eligibility.
These strategies, of course, face challenges. GM’s bottom line is in jeopardy due to supply chain interruptions, continuing inflation, and rising interest rates in the United States. The financial impact of decreasing sales volume in 2021 was mitigated by higher prices. However, when interest rates rise, it may become increasingly difficult for consumers to maintain their current payment levels.
Consumers are willing to spend more on automobiles, as the monthly average sale price has set a new high. As yet, it is unclear how long this trend will last, which could pose a risk to future profits. General Motors (NYSE:GM) potential as a good player for investors will depend on the company’s success in increasing the production of electric vehicles (EVs) and on customers’ willingness to pay slightly higher prices.
Featured Image – Megapixl © Mccrainemercantile
Author Shariq Khan 