GM Upgrades Bet on EVs as Investors Swoon For Electric Cars

By Mike Colias 

General Motors Co. is raising its bet on electric cars by more than a third, as it hustles to convince a skeptical Wall Street that it too can be successful in the nascent market.

The nation's biggest auto maker by sales said Thursday that it will spend $27 billion through 2025 to develop electric and driverless vehicles. That is up from a $20 billion figure that GM pegged in March, days before the Covid-19 pandemic forced the industry to shut its North American factories and touched off an industrywide cash crisis.

GM's new spending target represents more than half of its planned capital expenditures through mid-decade, even though electric and driverless vehicles today account for around 2% of the company's global sales, roughly mirroring the broader market. Electric vehicles generally have been money losers for car companies because of their high battery costs, although GM has said its next generation of electric cars will be profitable.

Traditional auto makers are racing for an inside edge in what investors see as the auto sector's next big growth opportunity. The soaring share prices of Tesla Inc., China's Nio Inc. and other young companies with pure-electric portfolios has added to the sense of urgency.

"We want to lead in this space," GM product-development chief Doug Parks said during a media briefing. "Tesla's got a good jump, and they've done great things. There's a lot of startups, and everyone else invading the space."

But so far, GM and other legacy auto makers have been largely ignored amid a frenzy of electric-vehicle investment.

Tesla's shares have leapt roughly sixfold this year as investors cheer its sales growth in China and budding revenue growth from selling connected-car services. Little-known Nio -- which in April needed a roughly $1 billion infusion from Chinese state investors amid mounting losses -- has seen its valuation rocket to $63 billion in recent months, just beyond that of GM.

Meanwhile, a slew of green-energy vehicle startups have had stellar debuts after being taken public this year through blank-check companies, including Hyliion Inc. and Fisker Inc.

GM shares have more than doubled since cratering in March during the factory shutdowns, but its stock price, along with many other auto companies, has lagged the broader market for years, even as electric-vehicle newcomers have seen shares jump.

Analysts have lauded GM's technology and commitment to growing its plug-in-car business. But, they say investors are more enticed by pure-play electric vehicle companies that come without the lower-margin, capital-intensive aspects of traditional car companies, including vast factory footprints and unionized work forces.

Some analysts have suggested GM spin off its electric-vehicle business to boost the share price. Chief Executive Mary Barra has said she is open to changes in GM's capital structure that would reward shareholders, but will not make a move simply to get a short-term pop in valuation.

(More to come)

(END) Dow Jones Newswires

November 19, 2020 13:24 ET (18:24 GMT)

Copyright (c) 2020 Dow Jones & Company, Inc.