“General Motors Co. has set a 2035 target date for phasing out gasoline- and diesel-powered vehicles from its showrooms globally, among the first major automakers to put a timeline on transitioning to a fully electric lineup,” WSJ writes.
Why It Matters: It’s a startling transition from GM’s current business model. Roughly 98% of GM’s sales, and all of its profit, are vehicles that run on fossil fuels and emit pollutants. Even though it labeled it as a goal, the nation’s largest automaker still says the 2035 date is aspirational. But it’s a significant commitment as governments and car companies march toward banning gas- and diesel-powered cars.
- GM’s shares rose around 4% on the news Thursday.
There’s also a financial benefit in doing so. At the corporate and consumer levels, the federal government and many states offer tax credits to help offset the higher cost of plug-in cars.
But Investors aren’t rewarding GM and other traditional car companies investing in plug-models. Instead, the interest has fallen on purely electric vehicle firms.
- “Until recently, GM’s stock price had lagged far behind the S&P 500 Index, often trading below the $33 price from its initial public offering a decade ago.”
- But GM’s amplified commitment to EVs has started to stoke some of the interest that propelled the Tesla hive so high.
- “Research firm LMC Automotive predicts electric vehicles will account for only 20% of global sales by 2032. RBC Capital expects electric-vehicle penetration to be 43% by GM’s 2035 target.”
- “Last year, about 2.2 million fully electric vehicles were sold globally, accounting for only about 3% of overall sales, according to research firm EV Volumes.”
The Bottom Line: There are more hurdles to broader electric vehicle adoption, including more charging stations and other infrastructure. Also, supply concerns remain about raw battery materials. GM also added it aims to be carbon-neutral by 2040.
Can General Motors ($GM) turn itself into an electric vehicle (EV) manufacturer? And if it can, will they be a large player that can compete with Tesla?
I generally look at Tesla ($TSLA) as what Apple was for smartphones. They will most likely retain the premium spot, high market share, and defensible charging ecosystem.
This means there is plenty of room and profits for others to manufacture EVs, but they might be more akin to Samsung, LG, Huawei, etc. Other EV manufacturers will probably use a shared ecosystem and accept lower margins than Tesla.