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GM: Risks Abound Due To Autonomous Vehicle Bubble

Dec. 06, 2018 10:07 AM ETGeneral Motors Company (GM)40 Comments


  • GM is correct to prepare for tough times, but they are not disclosing the true timeline for long-range electric vehicle (EV) and autonomous vehicle (AV) deployment.
  • The reality for autonomous vehicles includes regulations, production cycles, and delays in implementation for an extraordinarily difficult problem to solve – how to get machines to respond like humans.
  • For value investors looking to buy GM’s high yield at depressed prices, don’t base the decision on GM’s PR push around electric vehicles and autonomous vehicles.
  • Looking for more stock ideas like this one? Get them exclusively at Tech Insider Research. Get started today »

Last week, General Motors Company (NYSE:GM) cut more than 14,000 salaried staff and factory workers with plans to close seven factories worldwide in what Bloomberg calls a “sweeping realignment to prepare for a future of electric and self-driving vehicles.” Unfortunately for GM, and their employees, the future of autonomous vehicles is much farther off than what the company represents. Investors in GM stock should be cautious, and realistic, as to when new revenue streams will occur, as cutting costs, even to the tune of a net savings of $4.5 billion, might not be enough to wait out the innovation cycle.

In light of the recent layouts, there is $1.5 billion of reduced capex that the company will be saving by cutting the low-demand production lines and the anticipated plant closures (a drop in the bucket compared to the annual capex of $27.5 billion), however, the $1.5 billion capex is not being reinvested into electric vehicles or autonomous vehicle production at this time. The lack of reallocation conflicts with statements from the company CEO, Mary Barra, who promised the company would double investment in electric vehicles and self-driving technology during this week’s announcement.

The bottom line is that GM is correct to prepare for tough times, but they are not disclosing the true timeline for long-range electric vehicle and autonomous vehicle deployment.

Three Words to Heed for GM Stock: Gartner’s “Trough of Disillusionment”

In September, Autonomous Vehicles fell into the “trough of disillusionment,” which is the downward slope published by the analyst firm, Gartner, to show the hype cycle for certain technologies. You can think of this as “winter is coming” for tech products – a time when all of the buzz and excitement finally meets reality (note: artificial intelligence winter is a well-documented thing).

ABI Research, an advisory firm that

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