A leading company focused on virtual transformation.
Like the legendary comedian Rodney Dangerfield, classic automakers like General Motors and Ford “don’t get respect. “There’s no Wall Street, anyway.
Take GM, who saw its inventory value drop by nearly two-thirds since its October 2017 peak of $45. 88, takes as an example. The same story can be repeated over and over again with brands like Ford, Volkswagen, BMW, Toyota and Nissan.
On the other hand, new players, such as Tesla, have noticed a 500% value in their own inventory since mid-March, while startups like Nikola Motors are rewarded with market capitalization values in some cases close to those of classic automakers. – even if they have not yet built a singles vehicle.
This discrepancy has led some analysts to recommend the dismantling of car manufacturers established as GM to “unlock” the possibility of their own electric vehicle programs. While there has never been a genuine affection for the automotive industry, investors have fallen in love with classic manufacturers, Joe Phillippi said. , a long-time Wall Street analyst who now runs AutoTrends Consulting.
“More and more investors are that electric cars are long-term and that internal combustion engines will be dinosaurs. What Wall Street needs is growth,” he said.
Officials of former automakers are frustrated by the setting of the inventory market in electric cars, especially given the significant investments they are making on their own in zero-emissions technology. Ford, for its part, is investing nearly $12 billion in electrified cars through 2022 GM’s commitment is closer to $20 billion through 2025.
Executive Director Mary Barra said the automaker “on the road to an all-electric future,” with “20 or more” electric battery cars until 2023. Electric cars are expected to account for 40% of the new models GM will launch in China over the next year. the next few years.
While such announcements, along with better-than-expected profits, helped GM’s stock recover from the March 18 low of $16. 80, the company still languishes from its beyond glory. Its current market capitalization of $42. 93 billion compares to Tesla’s valuation of 390 billion.
Everyone on Wall Street doesn’t know GM. New research through Morgan Stanley estimates that the electrical aspect of GM’s business can be worth $20 billion at a split, while Deutsche Bank estimates that figure at $100 billion, or nearly 2. 5 times the company’s existing market capitalization.
Such a move “could unlock massive value,” Deutsche Bank analyst Emmanuel Rosner said in an appearance at CNBC this week. Meanwhile, Morgan Stanley automotive analyst Adam Jonas wrote in a study report Tuesday that “autonomy between the two sets may each lose the barriers to effective capital allocation and skill development. “
Could a split be part of CEO Barra’s plan?Asked during a call about the effects with analysts on the option to convert the corporate call to reflect his new interest in electric vehicles, Barra said that “there is nothing out of place”. “, and adds, “We compare and compare many other scenarios, so I don’t. We have nothing more to say that we are ready to look at and compare anything we believe will generate value for shareholders in the long run. “
The automaker has several tactics to use its concentration in development in generation to generate value. In November 2018, when it was announced that former GM President Dan Ammann would become CEO of Cruise, based in San Francisco, the New Zealand-born executive said in an interview. that the autonomous vehicle subsidiary may become more valuable than GM’s automotive operations at some point. He advised that the automaker could be a split or simply rename Cruise to reflect his growing interest in the higher generation.
But not everyone accepts the concept of dismantling GM. On the one hand, analyst Phillippi said, this would ensure that the “old” GM becomes “obsolete” as sales of conventional cars, gasoline and diesel decline in the coming years. And even if this component of the business could be only in the short to medium term, it would want to electrify its diversity to comply with the increasingly stringent U. S. and foreign mandates in terms of emissions and fuel economy.
Of course, GM – and Ford and VW and Toyota and all other classic brands – can also simply gradually remove their classic product lines. But despite the interest investors might have in electric vehicles, they are way ahead of what auto buyers demand.
In fact, the electric vehicle market has shrunk this year, falling stronger than the overall new car market. Sales are expected to return to around 200,000 by the 2020 total, announced Kevin Riddell, senior director of LMC Automotive, at an Assembly of the Automotive Press Association this week, up from 250,000 last year. This would account for only 1. 5% of new vehicle sales in the United States. Even Tesla has fallen, despite the launch of the new Model Y.
While LMC expects electric vehicle sales to start rebounding in 2021, an avalanche of new models will compete for an even small market, and, warned Reid Bigland, Fiat Chrysler’s former sales manager, vehicle sales are likely to be small, with the exception of Tesla, which means when battery-powered cars will start to profit.
These considerations don’t seem to worry investors very much. While classic brands are suffering from their percentage prices, Wall Street is increasingly adopting electric vehicle start-ups. Nikola, based in Phoenix, which went on the stock exchange this year, now has a market capitalization of around $16. billion, about two-thirds of Ford’s. However, the company is still within a year to launch the first of its hydrogen trucks and vans and batteries.
Nikola used an artistic technique to be included in the list, in partnership with VectoIQ Acquisition Corp. , a special purpose acquisition company, or SPAC. Similar “Blank Check Companies” will also publicly shut down EV Fisker Inc startups. Canoo at the end of this year. Fisker estimated that it could come out with a market capitalization of around $2. 5 billion.
Such unbridled optimism may continue for some time,” said Michelle Krebs, an analyst at Cox Automotive, as long as Wall Street considers electric vehicle brands to be a component of the high-tech world. the market fills up and the understanding that they are only promoting cars, whatever their strength, is entrenched.
That’s what classic brands expect.
Despite his frustration at the company’s poor functionality on Wall Street, where his stock has not exceeded $10 since July 2019, Ford’s new CEO, Jim Farley, told Business Insider this month that positive investors would reach an agreement.
Ford is not intended to be left behind in new battery-powered cars, or other high-tech areas, such as connected and autonomous vehicles, Farley insisted, adding that the car manufacturer’s “great relationship” with its existing consumers would help it as a market. “So I feel fantastic about our ability to compete with new competitors. “
Of course, he’s not the first to say it. In fact, it is quite the same position as former CEO Alan Mullaly and his successors Mark Fields and Jim Hackett. For now, at least, Wall Street is still not impressed.