To The Moon

$General Motors(GM)$ $DJIA(.DJI)$  $NASDAQ(.IXIC)$  $S&P 500(.SPX)$  

General Motors Company designs, builds, and sells trucks, crossovers, cars, and automobile parts and provides software-enabled services and subscriptions worldwide. The company's segments include GMNA, GMI, Cruise, and GM Financial. Its Cruise segment is engaged in the development and commercialisation of autonomous vehicle technology and offers OnStar and connected services to approximately 22m connected vehicles globally through subscription-based and complimentary services. It is also developing hydrogen fuel cell applications across transportation and industries, including mobile power generation, class seven/eight truck, locomotive, aerospace, and marine applications.

Investment Overview

Stronger product mix with an aggressive EV strategy, backed by strong balance sheets. By 2030, Ford aims to generate about 40% of its global sales from EVs, with 100% of its European sales from EVs. The launch of the F-series trucks and Mach-E SUV, coupled with EV model lineup, should be positive on its product mix and lead to stronger volume shipments in the 2-3 years. Further, Ford has more than sufficient cash of some US$29bn to support its EV expansion as well as its recent revamped business pillars between ICE vehicle and EV. Its capex is estimated at US$8-9.5bn in 2024 (in line with 2023 levels), with 40% of capex channeled into EV-related investments.

Ford 1Q24 sales outperformed its peers; Hybrid sales sets new quarterly record. Ford's 1Q24 US deliveries came in at 508k units, at an impressive growth of +4% qoq and +7% yoy, above its key US peers which mostly saw a sales contraction in the US. Ford's 1Q24 deliveries were underpinned by a healthy set of growth from both ICE and hybrid segments, with hybrid sales seeing a notable +40% yoy growth, the best quarter for Ford in terms of hybrid deliveries in over two decades. Growth in hybrid sales was driven by consumers' increasing preference towards hybrids over EVs, of which Ford has guided double-digit hybrid growth for 2024 on continued sales/dealership ramp-up. Though, the challenging EV environment persists, as witnessed from Ford's 1Q24 EV sales of 20k units (-22% qoq), a decline in EV sales that is also widely witnessed by other peers.

FY24F guidance stronger-than-expected; Potential upside in our view. Ford’s FY24F group adjusted EBIT guidance of US$10-12bn exceeded consensus’ expectations of US$10bn, with automotive EBIT guided at US$9.5-11.5bn, a -5% to +15% growth from FY23A’s levels, boosted by Pro segment (+11% to +25% EBIT growth) while Blue segment is expected to see slight negative impact (-6% to +1%), supported by a US$2bn cost reduction plan. Most notably, Ford is turning more negative for its Model E segment (EVs), with steeper-than-expected EBIT loss guidance at -US$5bn to -US$5.5bn, an increase of almost 15% from FY23A’s losses of -US$4.7bn, as a result of continued pricing pressure and investments. In end Mar, Ford reiterated its 2024 guidance and continued to give upbeat outlook. In our view, we see some room for positive upside to Ford's guidance, especially in relation to its Model E EV segment EBIT losses. With the recent easing of US Environmental Protection Agency (EPA) vehicle emissions rules and EV targets in the medium term, this could ease EV capex/R&D requirements and subsequently help to narrow EV-related financial losses, benefitting legacy players such as Ford.

Economic slowdown in key markets and hiccups in its EV strategy could derail its medium-term growth targets. Besides, uncompetitive vehicle models could result in severe financial impact on the company.

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