General Motors Stock: Worth The Wait

Summary

• For a large incumbent like General Motors, it didn't make financial sense to enter a niche market without not enough demand to realize its manufacturing, marketing and distribution scale advantages.
• Now, General Motors enters the EV market with scale that first movers may not ever achieve.
• Competitive advantages will allow General Motors to produce quality EVs in large scale without the growing pains and stumbles along the way like a competitor experiences such as Tesla.
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First movers are overrated. This established incumbent is making all the right moves to be a market leader as the automotive industry shifts focus to electric vehicles. This week’s Long Idea is General Motors (NYSE:GM) which is a micro-bubble winner in the auto industry. We also compare it to the micro-bubble loser Tesla (TSLA), which we view as one of the most dangerous stocks for 2021.

Even after its share price soared over the past six months, General Motors’ stock remains undervalued just as its business enters the next phase of growth. GM presents quality risk/reward given:

• The firm enters the EV market with scale that first movers may not ever achieve
• Incumbent market share gains in Europe bode well for General Motors’ fast follower strategy
• Tesla’s weaknesses are General Motors’ strengths
• Expectations for GM and TSLA remain disconnected from fundamentals.

Death Of OEMs Is Exaggerated

We first featured General Motors as a Long Idea in March 2018 when we noted the EV market presented large opportunities for future growth. The prevailing narrative was, and remains, that the automobile industry is permanently disrupted, and traditional internal combustion engine auto manufacturers will decline in concert with a long-term consumer demand shift toward EVs. Today, General Motors is leveraging its 100-plus years of history of manufacturing expertise to build EVs and enter the market when there’s enough demand to justify the number of EVs it needs to sell to be profitable, an achievement that escapes the “first-movers” in EVs.

Global sales of EVs in 2020 surpassed 3 million vehicles, or ~46% of the total number of vehicles General Motors sold in 2020. For a large company like General Motors, or any of the incumbents, it doesn’t make financial sense to enter a niche market when there’s not enough demand to realize its manufacturing, marketing and distribution scale advantages. It’s better to wait and enter the market when it can exercise its scale advantages to generate superior profits.

Now, with the EV market more mature and demand driven by regulations around the world, BloombergNEF expects the market to grow to 26 million vehicles sold in 2030. For comparison, worldwide car sales in 2020 were 64 million. Now is the time for incumbents to enter the EV market with unrivalled scale.

General Motors Is Entering The Market With Scale

General Motors is investing billions to convert more plants to EV production and enter the EV market with scale that the first movers have yet to achieve.

Details: General Motors aims to eliminate tailpipe emissions from its light-duty vehicles by 2035. As part of that goal, the firm is committed to launching 30 new electric vehicles (compared to Tesla’s four models) by 2025 in addition to the Chevy Bolt, which already is in production. A few examples of planned launches are the 2022 Chevy Bolt Electric Utility Vehicle, the EV Hummer truck, and the Cadillac Lyriq. These models show the firm’s willingness to integrate EV technology into existing brands across three of its largest categories: trucks, SUVs, and crossovers.

General Motors manufacturing, marketing, and distribution scale advantages give it the ability to produce and sell a higher volume of cars with lower cost and higher quality, and, as a result, realize much higher profit margins than first movers.

Europe and China Are Leading Indicators

Bears argue that incumbents will die because they cannot produce ICE and electric vehicles at the same time. Volkswagen Group (OTCPK:VWAGY) already has proven that argument wrong.

In 2020, Volkswagen had the most popular ICE model in Europe, the Golf, and the most popular EV in Europe, the ID.3, while slightly expanding its overall market share.

Volkswagen shows what, at least, a fair number of incumbents are capable of. In 2018, the firm sold just 40,000 EVs. In 2020, Volkswagen’s EV sales topped 212,000. Volkswagen now has 24% of the fully electric market across 27 EU countries while Tesla’s market share is just 13%.

A similar story is playing out in China with General Motors. General Motors’ joint venture in the country launched a new EV in July 2020, which sold 53% more units than the Tesla Model 3 in November 2020.

Tesla’s first-mover advantage is waning. Steep market share losses in Europe and China portend market share losses for Tesla across the world. Incumbent ICE manufacturers, such as General Motors and Volkswagen, have the necessary manufacturing scale to bring large numbers of high-quality EVs to market that they can sell at a profit.

Tesla’s Weaknesses Reveal General Motors’ Strengths

While General Motors’ EV technology may have lagged behind Tesla in the early stages, it's quickly catching up. Tesla’s preoccupation with adding more capital-intensive manufacturing capacity means that General Motors can spend more time and capital on developing EV technology.

Tesla is having an increasingly difficult time trying to improve quality, it recently issued a recall of 135,000 vehicles, or ~11% of the total number of vehicles it has produced since 4Q15, as it increases production.

On the other hand, General Motors’ strengths enable the firm to compete and succeed in a more mature EV market. Competitive advantages include:

• An existing cash generating business which:
  • Helps funds $27 billion of EV and autonomous driving investment
  • Allows the firm to invest in its own battery cell manufacturer, which gives “access to the cells and work on cost improvements and technology advancements”, as CEO Mary Barra noted.
• Existing production capacity – Can be efficiently converted to produce EVs at scale.
• Manufacturing expertise – Provide higher quality vehicles and use new technologies, such as Ultium Drive, the firm’s EV drivetrain system, to quickly scale manufacturing of all of its next generation EVs.
• EV technological advancement – Trusted by Honda to build two of its EV crossovers.
• Self-driving technology – Microsoft (MSFT) is collaborating with General Motors’ Cruise, behind which Tesla’s Autopilot ranks “a distant second.”
• Battery-technology – Ultium battery pack will offer 400 miles of range to help eliminate concerns over EV range restrictions.
• Quality – Top Automotive Corporation in J.D. Power’s 2020 Initial Quality Study.

These competitive advantages allow General Motors to produce quality EVs in large scale without the growing pains and stumbles along the way of a competitor such as Tesla.

General Motors’ Strong Cash Flows Versus Tesla’s Losses

Given the competitive advantages above, it should come as no surprise that General Motors generates significant free cash flow (FCF) while Tesla destroys it. Over the past five years, General Motors generated a cumulative $13.3 billion in FCF (17% of market cap) and Tesla burned $19.5 billion (2% of market cap). See Figure 1.

Figure 1: General Motors vs. Tesla: Cumulative Free Cash Flow Since 2016

Sources: New Constructs, LLC and company filings.

Expectations For General Motors’ Production vs. Tesla’s

Given General Motors’ inherent advantages over Tesla, the expectations implied by General Motors' stock price are extremely low, especially relative to those embedded in TSLA.

We use our reverse discounted cash flow model to highlight the disconnect in the future revenue and profit growth expectations baked into General Motors’ and Tesla’s current stock prices.

To justify General Motors’ current price of $52/share, we assume:

• Net operating profit after-tax (NOPAT) margin falls to 5.8% (equal to its five-year average and compared to 6.3% TTM) and
• Revenue falls 5% compounded annually over the next decade. For reference, average consensus estimates expect General Motors’ revenue to grow 6.8% compounded annually from 2021 to 2023.

In this scenario, General Motors’ revenue 10 years from now is $73.3 billion, or 40% below its 2020 revenue. See the math behind this reverse DCF scenario.

On the other hand, to justify its price at the time of writing, Tesla must:

• Immediately achieve a NOPAT margin of 6.2% (equal to Toyota’s (TM) TTM margin and compared to 1.9% TTM), and
• Grow revenue by 42% compounded annually over the next ten years. For reference, average consensus estimates expect Tesla’s revenue to grow 31% compounded annually from 2021 to 2025.

In this scenario, Tesla’s revenue 10 years from now is $1 trillion, or greater than the combined TTM revenue of Amazon (AMZN), Apple (AAPL), Microsoft, and Facebook (FB), some of the largest firms in the world. See the math behind this reverse DCF scenario.

In 2020, General Motors sold ~6.8 million vehicles and generated $109 billion in automotive revenue^[1], or ~$16,000 per vehicle sold. Assuming General Motors generates the same amount of revenue per vehicle sold in 2030, the implied number of vehicles its sells in 2030 is 4.6 million.

In 2020, Tesla sold^[2] ~500,000 vehicles and generated $27.2 billion in automotive revenue^[3], or ~$55 thousand per vehicle sold. Assuming Tesla generates the same amount of revenue per vehicle sold in 2030, the implied number of vehicles it sells in 2030 is 19.2 million or more than double Toyota’s 2020 production and over two-and-a-half times GM’s 2020 production.

Figure 2 compares the number of vehicles sold implied by General Motors’ and Tesla’s stock prices from 2020 to 2030.

Figure 2: Share Prices Imply Tesla Sells Over 4X the Vehicles of General Motors in 2030

Sources: New Constructs, LLC and company filings.*Actual Vehicles Sold

Despite Recent Gains In GM, Market Expectations For Future Cash Flows Are Too Low

In the above scenario, General Motors’ NOPAT a decade from now is 45% below its 2020 NOPAT and just 10% higher than its lowest level since 2012.

On the other hand, Tesla’s share price in the above scenario implies huge NOPAT growth. The firm’s NOPAT in 2030 would be $65.2 billion compared to just $600 million in 2020. For reference, the combined TTM NOPAT of General Motors, Ford (F), Toyota Motors, Honda Motor Co (HMC), Mazda Motor Corp (MSDAY), Nissan Motor Co (OTCPK:NSANY), and Tata Motors (TTM) is just $25.3 billion, or 61% below Tesla’s implied NOPAT in 2030.

Figure 3 compares General Motors’ and Tesla’s historical NOPAT with the NOPAT implied by each firm’s respective stock price.

Figure 3: General Motors Historical vs. Implied NOPAT

Sources: New Constructs, LLC and company filings.

This scenario (and the one above) also assume Tesla is able to grow revenue, NOPAT, and FCF without increasing working capital or fixed assets. This assumption is unlikely but allows us to create best-case scenarios that demonstrate how high expectations embedded in the current valuation are. For reference, Tesla’s invested capital increased an average of $3 billion year-over-year over the past five years.

GM Has Significant Upside If Revenue Grows At Consensus Estimates

Given the disconnect in valuation between the two automakers, the upside potential in owning GM is much larger than TSLA. If we assume General Motors’:

• NOPAT margin falls to 5.8% (equal to its five-year average margin and compared to 6.3% TTM) and
• the firm grows revenue by 4% compounded annually for the next decade (which equals consensus average of 6.8% compounded annually from 2021-2023 and 3% compounded annually each year thereafter), then

The stock is worth $111/share today – a 113% upside to the current stock price. See the math behind this reverse DCF scenario. Figure 4 compares General Motors’ historical NOPAT with the implied NOPAT in this scenario.

Figure 4: General Motors: Historical vs. Implied NOPAT

Sources: New Constructs, LLC and company filings.

General Motors’ Profitability Sits Atop Peers’

As noted above, more scale means more profits. General Motors’ scale and manufacturing efficiency helps drive the firm’s leading profitability. Its TTM NOPAT margin of 6.3% and return on invested capital (ROIC) of 8.4% is tops among its peers, Toyota, Tesla, Honda, Nissan, Tata Motors, Ford, and Mazda. On the other hand, Tesla’s ROIC of 2.7% is much lower and is below peers’ market-cap-weighted average ROIC of 3.7%, per Figure 5. As General Motors transitions to selling more EVs, we expect its scale advantage to continue to drive superior profitability.

Figure 5: General Motors vs. Peers: NOPAT Margin & ROIC

Sources: New Constructs, LLC and company filings.

General Motors’ Executive Compensation Plan Is Another Plus For Shareholders

Not only is General Motors more profitable and better positioned for long-term success in the EV market than Tesla, but its corporate governance is better, too. We prefer firms that tie executive compensation to improving ROIC, as there is a strong correlation between improving ROIC and increasing shareholder value.

General Motors rewards its managers with a long-term incentive plan that is comprised of 25% stock options and 75% PSUs. PSUs are tied to Relative ROIC-adjusted performance and total shareholder return. PSUs are capped if the firm fails to create economic earnings, by achieving an ROIC greater than its weighted-average cost of capital (WACC).

Tesla, on the other hand, which does not tie executive compensation to ROIC or economic earnings, and instead creates dangerous incentives.

The disconnect in corporate governance further reveals itself in the firm’s respective economic earnings. General Motors has generated a cumulative $15.2 billion (20% of market cap) in economic earnings over the past five years, while Tesla has generated a cumulative -$9.7 billion in economic earnings over the same time.

Keep These Winners And Sell These Losers

We originally paired General Motors and Tesla in our Micro-Bubble Winners report in August 2016. This pair isn’t the only micro-bubble winner and loser we’ve found. See Figure 6 for a list of all of our micro-bubble winners and losers. We believe the micro-bubble winners will outperform micro-bubble losers going forward, especially because the expectations implied by the micro-bubble winner’s valuations are much less than those of the micro-bubble losers.

Figure 6: Micro-Bubble Winners and Micro-Bubble Stocks

Micro-Bubble Winners	Micro-Bubble Losers	Report Date
Kellogg Company (K)	Beyond Meat Inc. (BYND)	2/16/21
Hyatt Hotels Corp (H)	Airbnb, Inc. (ABNB)	2/10/21
Williams-Sonoma Inc. (WSM)	Wayfair, Inc. (W)	2/3/21
Sysco Corporation (SYY)	DoorDash, Inc. (DASH)	1/27/21
Alphabet, Inc. (GOOGL)	GoDaddy Inc (GDDY)	9/26/18
Microsoft Corporation (MSFT)	Dropbox Inc. (DBX)	9/26/18
General Motors Co (GM)	Tesla Inc (TSLA)	8/16/18
The Walt Disney Company (DIS)	Netflix Inc. (NFLX)	8/16/18
Oracle Corporation (ORCL)	Salesforce.com Inc. (CRM)	8/16/18
Walmart, Inc. (WMT)	Amazon.com Inc. (AMZN)	8/16/18

Click to enlarge

Sources: New Constructs, LLC and company filings.

This article originally published on Feb. 18, 2021.

Disclosure: David Trainer, Kyle Guske II, and Matt Shuler receive no compensation to write about any specific stock, style, or theme.

[1] General Motor’s automotive revenue excludes revenue from GM Financial to measure only the revenue derived directly from automobile sales.

[2] Tesla reports vehicles delivered instead of vehicles sold. Throughout this report, we use vehicles sold in lieu of vehicles delivered.

[3] Tesla’s automotive revenue excludes revenue from its services and energy generation/storage segments to measure only the revenue derived from automobile sales.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Comments

[FROGBERT]

@David Trainer How come your co, New Constructs, rates GM Neutral..Not recommended with a 5 rating on free cash flow which you cited a a key strength in this article? Comparison to bubble stock TSLA doesn't make for rational decision. I bought GM at lower levels on valuation and incumbent advantages, then sold too soon out of concern for competing with TSLA low cost of capital and the flood of capital coming into the auto EV space.

[David Trainer]

@FROGBERT , over the TTM, General Motors' FCF is negative which drives our Neutral rating. However, Figure 1 shows General Motors' cumulative FCF since 2016, which is a more comprehensive look at the firm's FCF. We believe that General Motors is well positioned to continue to generate significant cash flow going forward. Thanks for reading!

[Green Candles]

Well the airlines largely had bankruptcies too, but I'm extra-long them coming out of Covid. I share your opinion on GM, with a long position to match. The value in a frothy market is quite compelling.

[Rex Rode]

Just keep in mind GM has 35 billion in cash and short term securities. Shareholder equity is almost 45 billion. GM's market cap is only 75 billion. So basically, the entire value being put on the company is only 35-40 billion. Heck, their stake in Cruise is valued at 20 billion alone. One day, the market is going to wake up. Actually, it's going to wake up very soon when EV stocks rebound along with Biden's bullish EV actions. It's worth noting GM is only down 5% this month and Tesla is down 31%. Expect this trend to continue. I would actually be shocked if GM doesn't finish the year trading between $90-100. GM is clearly massively undervalued. It's right before your eyes! Plus, they are financing their EV movement from the their free cash flow. No other EV company in the world is doing this or can do it.

[kos47]

• Competitive advantages will allow General Motors to produce quality EVs in large scale without the growing pains and stumbles along the way like a competitor experiences such as Tesla.
You can pay for your mistakes and learn from them or just learn from someone else's for free.

[chicagotim1]

Thanks for the article, I appreciate the point of view.

Apologies if I missed this in the article, but, per Gurufocus:
"General Motors Co WACC % :4.41% As of Today"

"Financial metrics" can be a nuanced topic, but, IMHO, it's a good sign that GM's ROIC is 8.4%, vs a WACC of 4.41%. It's my impression that if one were to compare these two metrics over time, it's been a while since the spread between the two has been this positive; just a guess.

I think Barra is one of the most underrated CEO's out there. She got GM out of markets that were structurally unprofitable (Europe and, I believe, India), and focused on markets where GM stands the best chance of making good returns (US, China). She's also got them focused on models that offer the best profit potential (although this is mostly an ICE discussion in the current market, IMHO).

To those who would adopt a 'show me' attitude re GM and its nascent push into EVs, well, I think this is a valid criticism. Quality, styling and value: whether we're talking BEV or ICE, that's where it's at. Personally, while I hope TSLA succeeds as a company, I think its valuation is nuts. But, credit where credit is due: TSLA's singular achievement, IMHO, is that it took the concept of the BEV from little more than econobox compliance car, to something seen as cool. This is just personal opinion, but while GM makes a few products that are undeniably cool (I think the new Corvette is a work of art); the company itself has a ways to go before it is seen as "cool".

If an auto maker wants to be big in BEVs, it's gotta have good battery tech. I think GM's Ultium battery is an interesting development; as I understand it, the battery's modular design will lend itself to easy configuration for a variety of models; trucks, SUVs, more traditional sedans. And GM claims it "...will drive battery cell costs below $100/kWh"; but it's not clear when this will happen.

media.gm.com/...

In any event, I'd never been too keen on auto stocks. The industry is capital intensive, cyclical, and in the midst of big time disruption. I think one of the reasons for low valuations across the traditional OEM stocks is that the market doesn't know who the winners will be. I do have a modest position in GM, mostly because I think Barra is a realist who has done an excellent job of restructuring GM, and given the company a good chance to succeed in the process.

Time will tell.

Best of luck to all.

[Fcrypto]

With GM’s poor track record in producing competitive vehicles with great styling, quality and innovation, I am reluctant to buy GM. They do a great job of convincing the media that this time will be different and this platform of new EV vehicles will captivate consumers, but in the end they will again produce a non-competitive set of vehicles that will sit on the dealer’s lot. Unsuccessful GM EVs have included the Cadillac ELR and Chevy Bolt. The new Lyriq is destined for failure with a range that is not even in the same ballpark as a Tesla.

[KimBEAV]

@Fcrypto The Hummer turns heads and GM's pickup offerings are very competitive. What really makes GM stand out from other EV players though is Cruise and that they control their own batteries.

I really think this time it is different

[Rex Rode]

@Fcrypto U need to look forward, not in the past. Mary Barra and crew have set the wheels in motion. Within 3 years, GM's market cap will exceed Tesla. Just look at the stock performance in the last 2 months. Tesla down 30+%, GM actually up. They are the only EV company up. Some day very soon, you are going to wake up seeing that GM will have jumped $10 in a day and will not look back. I remember telling some Tesla friends of mine recently. The smartest thing they could do was to sell 50% of their Tesla and buy GM. It was the best free advice my friends every received.

[dgiinvestor]

@Fcrypto To each his own. I prefer Chevy and GMC grills and styling to Tesla.

Teslas look like planarians to me.

[nut4squirrel]

I just heard on the radio today that GM is going to build a second giga-sized EV battery plant starting later this year. Using the same LG licensed chemistry at the first plant that was just completed. Likely in Tennessee.

[Zifangsun]

Two things the Wall Street missed:
1. EV lasts much longer than ICE, 500,000 miles vs. 150,000 miles.
2. Shared economy (AV) erodes Ownership economy.

Result: Pay-by-Mile replaces Pay-by-Car.

There's a fundamental shift on Auto industry business model, and Mary is leading it !

Long GM

[dgiinvestor]

@Zifangsun I just sold a 4Runner with 100,000 miles.

You routinely see Chevys with well over 200,000.

I get the point, somewhere on the internet someone posted that EVs on "average" last xy times longer than traditional cars. But to think 150,000 miles is the limit for a car shows you don't drive very much, or pay attention to those that do.

Where I am, 10 year old SUVs and luxury cars in every condition are rolling down the expressway with paper dealer tags. I have a year old car with 20,000 miles right now.

[Zifangsun]

@dgiinvestor ,

150,000 miles is the AVAREAGE, meaning half more & half less.

What you said is absolutely true.

There's no question though that EV lasts much longer than ICEV.

GM Cruise's CEO uses 500,000 miles for EV/AV market.

[clcellve]

“Over the past five years, General Motors generated a cumulative $13.3 billion in FCF (17% of market cap) and Tesla burned $19.5 billion (2% of market cap).” That’s a very important point.

Batteries. Tesla moved to EV’s in one segment – very high price cars – when batteries were very expensive. At the time, a cool novelty in a small but flashy market segment. GM deals in markets in millions. It simply was not worth it for GM (or others) to produce an EV.

Now, battery prices/efficiency are at the point where GM and other manufactures can make and sell cars to much larger markets, a manufacturing and selling capacity which Tesla will find they simply can’t match. And, equally important, GM has said they’re on schedule to produce better batteries at lower cost. So, EV’s now are starting to make sense for the mass market.

Tesla likes to tout how many charging stations they have – about 1,000. Well, GM has over 4,000 dealers, and very soon each dealer will be a charging station. Plus EVgo has 800 charging stations, and is growing fast. Any anyway, most people charge at home, at night.

This article is going to set Tesla supporters hair on fire. Be prepared for an onslaught of Tesla supporters commenting, mostly denying reality by saying Elon that says this, Elon promises that….

Good article. GM share price is going to increases very fast, very soon, when people give GM a fair and thorough review.

[dgiinvestor]

@clcellve Good point about dealer network potentially being used for filling stations.

[Agile Trader]

GM Cruise in talks to buy autonomous vehicle rival Voyage

“Voyage currently has autonomous vehicle pilots running in a number of retirement communities in the US, of having focused on delivering geofenced transportation to riders who might ordinarily have been locked out of private car ownership.”

“In Florida, retirement community The Village has 125,000 residents and 750 miles of road, spread across 40 square miles. The Villages in San Jose, meanwhile, has 4,000 residents and 15 miles of road.”

www.slashgear.com/...

[sandy758]

Assuming GM sales today were all EV’s and no ICE’s the company would have lower profits than they have now and a lower stock price. EV car sales will just eat into ICE sales resulting in no gain IMO.

[Samma-Dhana Investment Insights]

@sandy758 This really is the big question for me. How much will GM's EV sales eat into their existing ICE sales? Can anyone comment on this please?

[Tdot]

That's a fallaciously loaded question Cal, and there is no need for it. Just think of it as GM and other automakers are offering an additional powertrain offering in the product lineup. The EV market is still tiny, less than a percent take rate, but it is slowly evolving into growth as folks naturally switch from ICE to EV. Both can be profitable if well executed and compelling for the customers.

[Samma-Dhana Investment Insights]

@Tdot Thank u, that is a great answer. So, why is GM so undervalued? Is it because people are overestimating how quickly the switch from ICE to EV will be? Or is it because people are not including GM's Ultium battery and AV departments in their valuations? I know this is conjecture, but I'm just trying to wrap my head around it.

[J-Flo]

Staying long here... thanks for the article!

[Rex Rode]

It's as if I was writing this article myself. By any metrics, it's clear that GM is vastly underrated. Additionally worth mentioning is that GM has over 35 billion in cash/short term securities with total shareholder book equity at 45 billion. So with this in mind, the entire rest of GM's vast franchise is only being valued at 30 billion right now.....Just think about that for a moment considering their stake in Cruise was recently valued at 20 billion. I can go on and on but my estimates place a value of at least 150 billion (or $110 per share) that you mentioned. That said, the case for a higher valuation could easily be made. One day, people will wake up to see GM jump like $10 a share and never look back. 12 mo. target price of $85.

[ctevez86]

@Rex Rode it also has USD100bn in debt so its EV is around $157bn but still cheap compared to Tesla

[12freedom]

Most of that debt is from the finance arm; with matched asset-liabilities of finance arm that earn positive spread. The automotive debt is around 17 billion.

www.thedetroitbureau.com/...

Other positives not mentioned. GM's fuel cells are finding buyers in class 8 trucks. GM Defense (I believe) will be a huge revenue add going forward.

[rogarg77]

Excellent analysis

[Alchete]

David, isn't it odd that you deliberately (I assume) left out FCF from 2020, the most recent year? Is that because it doesn't help make the point of the article?

[tyler hammond]

@Alchete GM s FCF is distorted somewhat by the pandemic. It took out a large loan to preserve cash and repaid it all. Operationally they still had solid FCF.

[Alchete]

@tyler hammond Gotcha. But the pandemic was there for everyone, and despite Tesla expanding operations they were also the most FCF positive in their history.

[tyler hammond]

@Alchete Yes but it matters where the FCF is coming from. Tesla issued 10B in stock in 2020. They will continue to issue shares. TSLA makes most of its profits selling EV credits. GM brought in FCF selling cars. I expect GM to start taking some of TSLA s EV credit profits, as they are one of the only OEM s that didn't need to buy any credits in 2020.