GM, Honda announce EV collaboration, but stocks slip

Posted: 5 April 2022 5:41 pm
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Investors may have a hard time looking past GM’s declining vehicle sales to a future of building electric cars. The big question: Can these two compete with Tesla?

General Motors (GM) and Honda Motor Co (HMC) are teaming up to develop affordable electric vehicles (EVs), a move that should help accelerate the broader transition to EVs.
GM’s stock was trading lower Tuesday despite the news, though. Investors may be weighing the declining sales GM reported on Friday against its newest EV initiatives. And some may doubt the two will fare well against the EV leader, Tesla.
At the time of this writing Tuesday afternoon, shares of GM were down 4% for the day, while shares of Honda were down 3%.

GM and Honda to co-develop a series of affordable EVs

Automakers GM and Honda both announced Tuesday plans for a series of affordable EVs that use next-generation Ultium battery technology.
According to a joint statement, the companies will work together to produce millions of EVs starting in 2027. The companies highlighted plans to develop compact crossover vehicles, which, according to the statement, is the largest segment in the world, with annual volumes of more than 13 million vehicles.

It’s the latest stride between the two companies in their efforts to progress electric and autonomous vehicle technologies. GM and Honda first teamed up in 2013 and have been expanding their relationship over the years.
“GM and Honda will share our best technology, design and manufacturing strategies to deliver affordable and desirable EVs on a global scale, including our key markets in North America, South America and China,” said Mary Barra, GM chair and CEO.

EV costs remain a major barrier to wider adoption

EVs tend to have higher upfront costs and are on average more expensive to purchase than gasoline-powered cars.
In October, when the average price for a new vehicle topped $46,000, the average EV was above $56,000, according to Kelley Blue Book, a premium of more than 20%.
The 2021 Cox Automotive Path to EV Adoption study shows that, while Americans are more willing than ever to consider buying an EV, 51% of shoppers surveyed noted EVs were too expensive to seriously consider.
Forty-one percent of those surveyed were particularly concerned about the cost to replace the battery, and for good reason. EV batteries are one of the most expensive parts of an electric car. Though these costs have been declining — 89% over the past decade — the average battery cost for a typical EV still comes out to about $6,300, according to Bloomberg.
GM and Honda will also discuss future collaboration opportunities regarding EV battery technology, as the companies aim “to further drive down the cost of electrification, improve performance and drive sustainability for future vehicles.”
Both companies are working on next-generation battery development, including lithium-metal, silicon and solid-state batteries.

GM vehicle sales on the decline

On Friday, GM reported a 20% drop in new vehicle sales in the first three months of the year, despite an uptick in sales over the fourth quarter of 2021 driven by strong sales of pickups and SUVs. This comes as the ​​entire industry continues to face chip shortages and disruptions to supply chains.
The automaker said first-quarter sales fell 20% year over year to 512,846 vehicles, down from 642,250 vehicles in the same period last year.
Meanwhile, Tesla (TSLA) on Saturday reported record first-quarter sales, with the EV-maker delivering 310,000 vehicles despite logistics issues and factory closures.

Now what?

Investors must decide if GM and Honda are in a position to make up ground on Tesla, the EV market leader, as EVs gain in popularity.
GM has said it expects to overtake Tesla as the top US-based seller of EVs by mid-decade, pledging to invest $35 billion in EVs by 2025. The company expects to see annual global EV sales of more than 1 million by 2025.
Tesla delivered almost 1 million EVs in 2021.
At the time of publication, Matt Miczulski owned shares of GM and TSLA.

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