With Tesla stock envy, GM hopes to sell investors on its EV, tech future

DETROIT (Reuters) – General Motors Co (GM.N) has watched with frustration and envy as the market value of electric carmaker Tesla Inc (TSLA.O) has ballooned to more than triple GM’s size, but Wednesday the Detroit automaker will make the case that its EV and self-driving technology strategy deserves a higher value.

FILE PHOTO: General Motors Chief Executive Officer Mary Barra announces a major investment focused on the development of GM future technologies at the GM Orion Assembly Plant in Lake Orion, Michigan, U.S. March 22, 2019. REUTERS/Rebecca Cook/File Photo

GM Chief Executive Mary Barra and her top executives will host an investor conference in New York. They hope to convince potential shareholders GM is more than just a company in a cyclical industry, but a burgeoning technology firm at the forefront of tomorrow’s electric and self-driving cars.

“We believe we’re a compelling investment opportunity,” GM Chief Financial Officer Dhivya Suryadevara told reporters after GM reported quarterly results, when asked about the run-up in Tesla’s stock. She added GM is very happy with its position in the development of electric and self-driving vehicles.

“From a share-price standpoint, we’re very bullish on the future,” she added.

Barra has been restructuring GM’s operations and stressing her goals of readying GM for a future of “zero emissions and zero accidents” for several years.

Still, GM shares trade just above the $33 share price of its November 2010 initial public offering. That has left it with a market capitalization of about $49 billion, compared with Tesla’s valuation of about $160 billion. Tesla shares surged on Tuesday, extending a rally that has more than doubled the company’s market value since the start of the year.

Morgan Stanley analyst Adam Jonas on Monday captured GM’s conundrum in an analyst note entitled, “GM’s Investor Day: What More Can They Do?”

The bulk of GM’s profits is still derived from the fuel-hungry pickup trucks and SUVs sold in the United States. The Chinese market has been the source of a steady $2 billion in profits a year, but that is threatened by a market slowdown, rising costs for electrification and now the disruption caused by the coronavirus outbreak.

While China will deliver lower equity income to GM in the near term, its remains a solid contributor that is profitable and dividend paying, and will play a key role in the development of EVs globally, according to the slide presentation. GM also sees growth for its Cadillac brand in both volume and profits in China.

Barra’s challenge now is to assure investors that GM can make the leap across the gap separating its profitable internal combustion present and an uncertain electric future. As one slide emphasizes, using the profile of a pick-up truck, “Our electric future is now.”

While gasoline-powered vehicles will make up a large portion of U.S. sales into the 2030s, GM will spend more on developing electric vehicles than those with internal combustion engines over the next five years, Barra said in October.

GM will lay out a more detailed plan for the development of EVs and self-driving vehicles at the investor day, including its Cruise self-driving unit, according to slides posted on the company’s investor relations website.

Some analysts have suggested GM should spin off Cruise, but Suryadevara said GM has no plans to do that. She added that spending in 2020 on that business will roughly match last year’s $800 million expenditure. “The business opportunity is phenomenal.”

GM said in a slide the self-driving market opportunity totals $8 trillion.

One of the audiences for the investor day is potential employees as GM competes with Tesla and other automakers globally to hire top engineers and software developers outside of Detroit, highlighting technical centers in Ontario and Israel. One slide boasted “GM is where the talent is.”

Also on the agenda will be the company’s plans for its Supercruise partially automated driving system, which GM will offer on seven models in 2021 and 12, including full-size pickups and SUVs, in 2022, according to a slide.

GM also will lay out its plan to reduce manufacturing complexity this year by eliminating 25% of the parts used in its plants, according to the slides.

In December, GM and South Korea’s LG Chem (051910.KS) said they would invest $2.3 billion to build an EV battery cell joint venture plant in Ohio, creating one of the world’s largest battery facilities.

That same month, GM’s Cadillac chief said most if not all of the vehicles offered by the luxury brand would be electric by 2030.

GM said last week it would invest $2.2 billion in its Detroit-Hamtramck assembly plant to build electric trucks and SUVs, including the Cruise Origin, a driverless vehicle for ride-sharing service. GM plans to offer electric trucks, including a premium electric GMC Hummer pickup truck in fall 2021.

Reporting by Ben Klayman and Joseph White; Editing by Nick Zieminski

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source: reuters.com