To The Moon

$General Motors(GM)$ $NASDAQ(.IXIC)$ 

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

Adopting a new mindset. General Motors (GM) has offered its employees a buyout scheme which could amount to a US$1.5bn charge to downsize the existing structure in view of rising electrification, a result of higher sharing of platforms and reduced vehicle complexity. As improvement in efficiency and fewer parts number under the EV strategy, GM is taking a more active approach to streamline its cost structure, which is important on its profitability in the future.

EVs to drive up sales only in two to three years. General Motors aims to achieve an annual EV sales and revenue target of 1m units and US$1bn by 2025 in North America and China. Its ultimate goal is to achieve annual revenue of US$50bn by 2030. The company has budgeted to spend ~US$2bn on software development and EV portfolio acceleration. A total of 30 EV models will be launched through 2025. Among them, a new entry-level EV model Equinox EV will be released in 3Q23, which is expected to be the group's hottest model with affordable pricing. The supply agreements for EVs have been secured.

Financial targets for FY23. The management has guided FY23 EBIT-adjusted earnings of US$10.5-12.5bn and net earnings in the region of US$8.7-10.1bn. GM is accelerating its EV profile with four new EV models expected in the market for sales in FY23. To support its EV business growth, GM will be investing some US$11-13bn largely in new battery cell and vehicle production plants to expand capacity and to achieve vertical integration.

 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.

Considering GM's plan to expand its EV product portfolio from 2022 till 2025, heavy investment in R&D work would drag the group's earnings until the successful scaling up of the EV business. GM has been streamlining some of its overseas operations to improve the overall profitability of the group.

Will be cautious in investing in this at the moment.

@TigerStars 

DYODD