Wednesday Roundup: 10/06/2021

There was an article out today titled, "General Motors Sees Revenue Doubling In EV, Self-Driving Push To Catch Tesla". This caught my eye and as I read through it, it pretty much hit on the recent blog with respect to Rivian Automotive, Inc. (RIVN) and what I'm calling vertically integrated EV leaders, which I consider to be Tesla, Inc. (TSLA), Lucid Group (LCID) and Rivian.

Here's the quick highlights:

  • At an investor event Wednesday, GM announced it's targeting revenue of $280 billion by 2030 and profit margins of 12%-14%. That would be up from $122.5 billion in revenue and 8% margins in 2020.

  • Its plans rest on not just making cars and trucks, but also offering software services that generate recurring revenue.

  • Barra pointed to multiple drivers of long-term growth. Those include, crucially, an ambitious rollout of electric vehicles, with more than 30 new EVs coming across the globe by 2035.

  • Unlocking growth in EVs through the Ultium hardware platform and leadership in software and services through the Ultifi platform.

  • Leading the race to commercialize AVs.

  • Increasing investment in EV charging.

There's more, but I'll keep it high-level for now. General Motors Company (GM) is talking pretty big about being a global leader for the EV revolution. This is coming from a company with its Chevy Bolt generating just over 31,000 units over the past twelve months as its leading current EV product, versus Tesla approaching 1 million units through 2021.

For me, the key takeaways from a risk perspective are as follows:

  • Current global supply chain predominantly non-EV focused.

  • Total leverage risk at net $22 billion when factoring financing and straight debt.

  • Lack of technology leadership for battery and AVs.

  • No clear path for EV infrastructure/charging

  • Challenge of cannibalization of non-EV to EV, as well as creating new products on an EV platform.

  • Dealership versus D2C model.

  • Pull to compete for human capital needs to lead the industry.

  • Commitment/ability to generate consistent quality across 30 model target

  • Long-term need to sustain service centers for non-EV vehicles versus EVs

When we think about Tesla, Lucid and Rivian, there are of course risks to their potential as well. But they are already ahead of GM on many fronts, and have much stronger capital structures in place. As I've said before, there is way too much focus on GM and Ford Motor Company (F) as well, that they have a clear path to success. Both Ford and GM Stock Prices, SPs have been in the dumps for quite a while and Wallstreet has begun pumping the narrative to inflate them - this started last fall in 2020.

I've got both GM And Ford databases built for their monthly/quarterly model-by-model information, so I'll be watching each and every quarter to see how their ambitions versus reality progress. GM is touting the Silverado, Hummer, and an electric cross-over as short-term EVs, while Ford is touting the F-150 to follow the estimated 26,000 units for 2021 of the Mustang Mach-E.

It definitely won't be as simple as turning a switch for companies like GM and Ford to pivot to the EV revolution. It will be more akin to steering a massive ship into an entirely different direction. I've seen some compare the current EV transition to the Model-T revolution, and I agree. Tesla is the leader with Lucid and Rivian following suite, and the field is wide open for new brands to entirely take the long-term future market.

Isaiah Chapter 26 Verse 4 - "Trust in the Lord forever, for the Lord, the Lord himself, is the rock eternal."

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