GM must follow Tesla speech

GM painted an extremely ambitious picture of growth at its highly anticipated 2021 investor conference. However, what investors really need from the company is not more talk.

On Wednesday afternoon, the Detroit automotive giant launched its first major strategic event since the start of the pandemic by promising to double its revenues and increase its margins by 2030. These objectives constitute the heart of the offering. more daring of General Manager Mary Barra to date to position GM as a growth-oriented tech company rather than just a manufacturer of light vehicles. As cars become the ultimate mobile devices, it wants to be the Apple of the auto industry, a “platform innovator” with more than $ 80 billion in revenue from “new companies” by the end of the year. decade.

The vision itself was not very surprising— Ford,

Volkswagen and Chrysler owner Stellantis have all raised new business opportunities on comparable investor days this year, but the numbers were. GM has averaged $ 138 billion in revenue per year over the past five years. On this basis, it expects an annual growth of around 5% of its traditional activity of sales and financing of light vehicles, including electric, and in addition to this exponential growth of a range of complementary services that remain today mostly at the start-up stage.

By far the most mature of these services is OnStar, which GM has developed over 25 years as a roadside assistance service made possible by wireless technology. That’s probably the bulk of the $ 2 billion in high-margin revenue the company said it gets from subscriptions today. As internet connections and in-vehicle operating systems evolve with the smartphone industry, GM expects that number to grow rapidly, reaching between $ 20 billion and $ 25 billion by 2030.

This bullish projection looks almost timid next to GM’s claims for Cruise, the San Francisco-based autonomous vehicle operation it bought in 2016. Dan Ammann, the former investment banker who has run the unit since 2019 and brought in Honda, SoftBank, Microsoft and Walmart. as a minority shareholder, expects sales of $ 50 billion by the end of the decade. Cruise is still perfecting the notoriously difficult technology required to deliver safe driverless taxi rides to consumers, but Ammann expects things to take off after 2023.

It is this kind of ambitious futurology that has earned Tesla cult following and an outsized stock valuation. What’s the point: GM’s event was embellished with implicit references to the challenge of the US leader in electric vehicles.

General Motors plans to phase out virtually all of its gasoline and diesel vehicles by 2035. Leading this transition is the first fully electric Cadillac. Mike Colias of the WSJ visited a GM test site for a tour and an exclusive interview with GM Chairman Mark L. Reuss. Photographic illustration: Alexandre Hotz

Ms. Barra can’t be faulted for trying to capture as much excitement as possible in automotive technology, but it remains easier to connect the dots between the present and the future in Elon Musk’s business. While Tesla is already experiencing rapid growth thanks to popular electric vehicles, GM has shrunk in recent years as part of a strategy to focus on profits rather than revenue, and this summer it has recalled all of its vehicles. Electric Bolt due to fire hazard. More than big promises for the still distant future, the company needs its next-generation flagship models, such as the Cadillac Lyriq to be released next year, blowing consumers on the road.

The good news for investors is that none of GM’s growth hopes are rooted in its stock, which fell with the broader market on Wednesday and is still trading at a modest eight times future earnings. If even a small portion of the company’s new business plans pay off in the years to come, shareholders could still get a boost.

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Write to Stephen Wilmot at [email protected]

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