The Key To GM’s Profitability

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In his podcast addressing the markets today, Louis Navellier offered the following commentary.

GM’s Profitability

General Motors Company (NYSE:GM) announced better-than-expected first-quarter operating earnings this week. What is not being talked about is that the key to GM’s profitability is that they are doing better than Ford because they are slower to build EVs. 

Although GM sells a lot of Bolt EVs and has announced a lot of new EVs, GM trails Ford in EV sales, so it is naturally more profitable.

GM is trying to cater to everyone, but its new EVs, like the Cadillac Lyriq and Hummer, are very expensive. LG Energy Solutions is GM’s lithium-ion battery supplier and has been slow in supplying GM with new batteries, so GM’s EV production remains constrained. 

Long-term, GM needs an iron-phosphate (LFP) battery supplier if it wants to sell more EVs and compete with Ford since lithium-ion batteries are significantly more expensive due to the fact that they utilize nickel and cobalt.

Complicated Lithium

Sociedad Quimica y Minera de Chile S.A. (NYSE:SQM) is the second largest lithium mining company in the world and should benefit from the new EPA rules, the rise in energy storage facilities with LFP batteries as well as electric vehicles (EVs). 

However, shortages of lithium, nickel, and cobalt have made EVs more expensive than vehicles with internal combustion engines and are preventing new EV manufacturers, like Lucid and Rivian, from reaching profitability.

Complicating matters further, Chilean President Gabriel Boric recently unveiled a new state-led strategy to develop its vast resources of lithium with private companies.  Currently, Albemarle and Sociedad Quimica y Minera de Chile have leases to mine lithium in Chile. 

Although President Boric wants to retain a majority interest in new lithium mining projects, it will be interesting if Albemarle and Sociedad Quimica y Minera de Chile cooperate on new lithium projects.  

Both Albemarle and Sociedad Quimica y Minera de Chile sold off on the news of President Boric’s announcement, but both companies have long-term leases that are not expected to be impacted by the new proposed lithium mines.

High Crude, Low Diesel

Crude oil inventories have been falling in recent weeks, so I am anticipating significantly higher prices at the pump my Memorial Day weekend.  Multiple energy experts are now raising their near-term price targets to $100 per barrel.  

The Biden Administration can release more crude oil from the Strategic Petroleum Reserve (SPR) to try to curb soaring crude oil prices, but the SPR has been drained to over a 40-year low and the U.S. is now in the midst of soaring season demand that will be much stronger in the summer months.

A warmer-than-normal winter in the Northeast cut the demand for heating oil.  As a result, refineries could make more diesel versus heating oil (both are distillates), so the price of diesel has finally fallen below that of gasoline in many states. 

Additionally, lower demand from the trucking industry and businesses is also putting downward pressure on diesel prices.  Many stores remain overstocked, so until demand picks up, diesel prices are expected to remain low, since the demand from the trucking industry remains the key driver behind diesel prices.

Coffee Beans: Vinyl Revival.

Vinyl album sales in the United States surpassed CD sales for the first time since 1987 last year with 41 million vinyl records being sold. In the meantime, CD album sales plummeted to just 33.4 million last year. Source: Statista. See the full story here.