General Motors Company (GM) is an automotive manufacturer headquartered in Michigan, USA. It is primarily involved in the design, manufacturing, and marketing of a wide range of vehicles. The company operates in 30 countries and boasts a diverse portfolio of brands including GMA, Cadillac, Buick, and Chevrolet.
GM not only brings in revenue through its vehicle sales and automotive parts but has also diversified its revenue stream through financial services powered by its subsidiary, GM Financial. The company’s Cruise autonomous driving division as well as its Ultium battery platform allow it to take a piece of the electric vehicles industry pie.
GM also has a diverse customer base, with buyers of its products and services spanning rental car companies, commercial fleets, leasing companies, and government departments. Thanks to its commitment to innovation, it can serve this customer base well.
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Despite all that, the company is facing an existential threat from within the industry. Electric Vehicle companies, which are nimble and do not carry the burden of catering to ICE engine vehicles market, are slowly driving legacy car makers out of business.
A recent example of this was seen in Canada. General Motors Canada asked the Canadian government to slap tariffs on vehicles imported from China. This was done in anticipation of BYD launching its cars in the country.
The US market isn’t much different and already has tariffs in place for Chinese EVs. Europe isn’t much behind, slapping tariffs on Chinese EVs to promote their own car industry. In such a scenario, car makers like GM can buy time. But can they really come up with a technology that can beat the EV revolution?
The US government supports legacy car makers in converting their closed factories into EV manufacturing facilities. In July this year, the Department of Energy allocated $500 million to help GM convert its facility in Michigan to an EV manufacturing plant.
With the government’s support, GM can enter the EV market. However, surviving in this market against established players will be a completely different ball game.
Unless there is clarity on how GM intends to stay relevant in a changing world, investors may consider it another great American company that couldn’t innovate in time.
General Motors isn’t on our latest list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 72 hedge fund portfolios held GM at the end of the second quarter which was 78 in the previous quarter. While we acknowledge the potential of GM as a leading investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as GM but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.