GM will present an all-electric pickup truck shortly.
Nicholas Ratzenboeck/AFP through Getty Images
Electric-vehicle stocks are on fire in 2020 and
wants to join the EV party. But the more than century-old auto maker might have to spin off its EV operations to get investors to recognize the company as a significant player that segment of with the industry.
Analysts have been wondering whether General Motors (ticker: GM) would spin off its autonomous-driving unit, Cruise Automation. The business was valued at about $19 billion, based on recent private investments, which is about half of GM’s market capitalization.
On Wednesday, Deutsche Bank analyst Emmanuel Rosner took the spinoff discussion in a different direction during GM’s earnings conference call, asking CEO Mary Barra whether the company would spin off its electric vehicles into a separate business.
“When you look at the high market valuations and cheap access to capital of some of these electric-vehicle companies we spoke about earlier…can that make you consider spinning off GM’s electric-vehicle operations,” Rosner asked, laying out his reasoning.
“We are evaluating and always evaluate many different scenarios, so I don’t have anything further to say other than we are open to looking at and evaluate anything that we think is going to drive long-term shareholder value,” Barra responded. “So I would say nothing is off the table.”
It was a fairly standard answer.
GM has well-known EV ambitions. The company hosted an EV technology day and touted a 400-mile EV range, something
(TSLA) achieved earlier this year.
GM is also planning to introduce an all-electric pickup truck soon. Wedbush analyst Dan Ives expects the all electric GMC Hummer to be revealed in the fourth quarter of 2020.
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The valuation gap is tempting for any traditional auto maker to pursue. Tesla is valued at roughly $750,000 per recently delivered car. GM fetches only about $8,000 per recent delivery.
What’s greater, Morgan Stanley analyst Adam Jonas has suggested that GM’s EV business could be worth $100 billion when he applies the EV penetration and industry growth expectations he uses to value Tesla to his GM financial model.
Of course, there is no right per car valuation. And Tesla is growing much faster that GM. What’s more, without GM Cruise and GM EV, investors would need a different valuation for the legacy-GM—something Jonas also recognized in his $100 billion EV valuation thought experiment.
Thinking outside the box is a good idea for traditional car investors today. EV stocks Barron’s tracks are up about 240% year to date on average, far better than comparable returns of the
Dow Jones Industrial Average,
as well as automotive peers.
GM stock, on the other hand, is down about 32% year to date. The Detroit-three, including
Fiat Chrysler Automobiles
(FCAU) are down about 29% year to date, on average.
Tesla’s incredible stock run has boosted EV investor sentiment. Its shares are up 92% over the past three months alone. Tesla is now the world’s most valuable car business.
Write for Al Root in [email protected]