GM Will Spend $20B on Electric Vehicle Development

March 6, 2020
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American automaker General Motors (NYSE: GM) has surprised investors this week with an announcement that it will spend $20 billion over the next five years on its electric vehicle (EV) programs. The company aims to develop a robust product line and sell millions of EVs around the world. With a newly signed battery deal, the company will aim to take on Tesla, the current leader in the market.

Eye on the Future as GM Bets on EVs and Automated Driving

Focusing on more than just EVs for consumers, GM will also allocate funds to an automated vehicle program. Automation could change the logistics market in the United States and around the world, with self-driving delivery trucks expected to make professional truck drivers obsolete.

GM, like most traditional automakers, is significantly behind in EV research and development. To help hasten its deployment of fully electric cars to the market, the company has partnered with LG Chem, a South Korean company that will provide batteries and technical support.

With LG’s help, GM expects that its vehicles will be able to achieve driving ranges above 400 miles, at a lower cost.

Large Automakers Investing Heavily Despite Market Slowdown

In the 2019 fiscal year, EV sales fell by 6%. Gas-powered cars still dominate the market, with EVs only making up around 2% of the 17 million cars that were sold in the U.S.

GM is not alone in its pivot to EV development. It follows Hyundai, Toyota, Volkswagen, and Ford, all of which have developed their own ambitious programs.

Difficult to Catch Up to the Market Leader

Investors are optimistic about the long term strategy, but GM and its competitors have a long way to go before they can catch up to Tesla. As the market leader in terms of both unit sales and technology, Tesla has a huge advantage. It has more advanced production lines and more real-world EV data than any other company. Tesla’s annual revenue is just one-fifth of GM’s, yet its market value is three times more.

This indicates that investors have a lot of confidence in Tesla, especially after it expanded into China with a new production facility, with another factory currently in development in Germany.

General Motors might be behind, but its commitment to an electric future has excited investors. Shares were up 2.5% immediately after the news on Wednesday, and we could see more EV-focused investor confidence in this stock over the coming months.

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