VALUATION HIGHLIGHTS
- GM North America constitutes 53% of the Trefis price estimate for General Motors's stock.
- Automobile Leases & Loans constitute 18% of the Trefis price estimate for General Motors's stock.
- GM China constitutes 11% of the Trefis price estimate for General Motors's stock.
WHAT HAS CHANGED?
- Latest Earnings
GM posted a better-than-expected set of Q4 2024 results. Operating profits came in at $2.5 billion from sales of about $47.7 billion. For 2025, the company expects operating profits of between $13.7 billion to $15.7 billion. The midpoint of the company's forecasts for earnings per share for 2025 is $11.50, up from $10.60 per share earned in 2024.
- Tairff impact on GM
The Trump administration's imposition of 25% tariffs on imported vehicles and auto parts is expected to have a meaningful impact on General Motors, given its substantial manufacturing footprint in Mexico and Canada. About a third of GM vehicles sold in the U.S. during the first three quarters of 2024 were assembled in these countries. Key models that could be impacted include the Chevy Silverado, Equinox, and GMC Terrain.
POTENTIAL UPSIDE & DOWNSIDE TO TREFIS PRICE
- Average price of GM vehicles in U.S. :
The average price of GM vehicles in North America rose from around $36,000 in 2020 to almost $45,500 in 2024. Trefis expects the metric to rise marginally going forward to about $46,000. However, if the metric rises to about $50,000, there could be a 10% upside to our price estimate. On the other hand, if prices decline to $40,000 by the end of our review period, there could be a 7% decline in our price estimate.
BUSINESS SUMMARY
GM is one of the world's largest automakers. GM commenced operations on July 10, 2009, after it substantially acquired all of Old GM's assets and certain liabilities through a 363 Sale under the Bankruptcy Code.
GM Automotive sells vehicles under the Buick, Cadillac, Chevrolet, and GMC brands. The company also has an equity ownership stake in entities that sell vehicles in China under the Baojun, Buick, Cadillac, Chevrolet, and Wuling brands. The company also develops and commercializes autonomous vehicle technology under the Cruise brand. GM also provides automotive financing services via its subsidiary, General Motors Financial Company.
SOURCES OF VALUE
GM's U.S. operations are the company's most valuable business, per our estimates.
GM's U.S. Trucks Business Is Highly Profitable
GM's average transaction price in the U.S. is much higher than in any other geography. This is primarily because of the high number of pick-up trucks it sells to commercial and retail buyers. Moreover, GM is undertaking moves to modernize its truck lineup, changing the make of their bodies from steel to aluminum, which should make them lighter, more fuel-efficient, and easier to handle. As a result, the company's profitability from this segment could continue to rise and help drive its overall profits.
KEY TRENDS
Increased competition from regional and global automobile manufacturers in fast-growing emerging markets
As the automobile market in developing countries continues to expand, international and domestic competitors are aggressively vying for market share. This heightened competition may lead to price reductions, thinner margins, and challenges for General Motors (GM) in maintaining or growing its presence.
A key competitive pressure comes from China’s electric vehicle (EV) sector, particularly companies like BYD, which have rapidly expanded into global markets with cost-effective and technologically advanced EVs. Chinese automakers are not just dominating their home market but are also aggressively pushing into emerging markets in Asia, Europe, and Latin America. This could pose a significant threat to GM.
Concentrated design and engineering resources on fewer brands and architectures
GM manufactures more than half of its vehicles using a common global architecture across its operations. This has resulted in lower investment per architecture and brand and will increase GM's product development and manufacturing flexibility, allowing it to maintain a steady schedule of important new product launches.
Continued investment in a portfolio of technologies
GM is focusing on the following to address market needs:
- Continue to increase the fuel efficiency of its cars and trucks.
- Develop alternative fuel vehicles.
- Invest significantly in plug-in electric vehicle technology.
- Continue development of hydrogen fuel cell technology.
- OnStar in-vehicle safety, security, and communications service
- Development of personalized, on-demand car-sharing services, like Maven.
- The addition of autonomous technology features to its vehicles.
GM's continued investment in technologies that support energy diversity and energy efficiency, as well as in safety, telematics, and infotainment technology, will drive higher vehicle sales.
