Electric vehicle (EV) stocks are hardly a playground for value investors. Tesla (NASDAQ:TSLA) has a high valuation multiple, while Nio (NYSE:NIO) has no price-to-earnings (P/E) ratio because it has no earnings.
Yet, there is one EV-participating asset that’s worth considering for the new year, although it’s not a pure-play EV stock. Even though the company is still reeling from the now-resolved autoworkers’ strikes, General Motors (NYSE:GM) presents a value proposition that enterprising investors shouldn’t ignore.
General Motors’ New Year’s resolution: Slim down
Just as many people will resolve to lose weight in 2024, General Motors has an apparent New Year’s resolution to slim down in order to reduce its expenditures. This is practically inevitable, since General Motors will have to pay its workers higher salaries in the wake of the United Auto Workers (UAW) negotiations.
Job cuts have become normalized in the post-COVID-19 era, so it probably won’t shock anyone to learn that General Motors is enacting fresh rounds of workforce reductions. It’s unfortunate for the furloughed workers, but the job cuts may be necessary for General Motors’ long-term viability.
Here are the latest developments. First, Reuters reported that General Motors plans to slash 24% of its Cruise division workforce, which specializes in autonomous (self-driving) vehicles. These layoffs reflect a “new future and a more deliberate go-to-market path, meaning less immediate need for field, commercial operations and corporate staffing,” General Motors explained.
GM stockholders shouldn’t complain too much about this. The Cruise division lost over $700 million in the third quarter. Moreover, it has lost over $8 billion since 2016, so it’s not a bad idea for General Motors to trim some of the fat in its autonomous-vehicles business.
Beyond its Cruise unit, General Motors is driving ahead with layoffs at its Michigan factories. Specifically, the automaker announced plans to let go of 1,000 workers at its Lake Orion production facility and over 300 workers at its Lansing Grand River facility.
A Barron’s report concluded, “The layoffs suggest GM is bracing for tougher times ahead.”
However, this might not be the right conclusion, as General Motors could just be responding to the tougher times that have materialized in the rear-view mirror. Again, General Motors is still dealing with the financial fallout from the autoworkers’ strikes — even though those disputes have been resolved.
General Motors stock: A compelling value for EV investors
Even though General Motors is evidently tapping the brakes on its Cruise business, it doesn’t mean it’s giving up on new-energy vehicles. Indeed, the automaker is pushing forward with its commitment to phase out internal-combustion-engine (ICE) vehicles by 2035.
While signaling some flexibility, GM CEO Mary Barra made no bones about her company’s road map for the coming decades.
“Our plan is to only be selling EVs, light-duty EVs at that time, but of course we’re going to be responsive to where the customer is at, but we have a plan to do that,” Barra stated.
Moreover, she isn’t all talk and no action. General Motors is taking specific steps to promote clean-energy vehicle advancement and adoption, such as teaming up with Japanese construction machinery manufacturer Komatsu to develop a mining truck powered by hydrogen fuel cells.
Additionally, GM is adding a new angle to a legacy vehicle brand. The company recently announced an electrified Cadillac SUV, which will be called the VISTIQ. According to John Roth, vice president of Global Cadillac, this new vehicle “adds another compelling EV to the Cadillac lineup, reinforcing our commitment to an electric future.”
This addition could prove to be a timely entry into the General Motors EV portfolio, since Roth claimed that 60% of consumers “are looking for an EV in their next purchase.”
GM President Mark Reuss echoed this idea, saying, “We have a lot of demand for an Escalade or an SUV that is luxury, that’s an EV. We know that.”
Consider GM stock for a good EV-market value
Trading at around five times its GAAP-measured, trailing 12-month earnings, General Motors looks like a steal at its current valuation. One certainly couldn’t say the same thing about pure-play EV manufacturers like Tesla and Nio.
Besides, even if it’s not exclusively manufacturing EVs now, General Motors plans to get to that point by 2035. Thus, if you’re bullish on the future of new-energy vehicles and are in the market for a good value, consider a position in GM stock before the year is over.
