GM Partners with LG to Accelerate Electric Vehicle Development

September 8th, 2011 by Trefis Team
+0.92%
Upside
44.67
Market
45.08
Trefis
GM: General Motors logo
GM
General Motors

Source: GM, LG

GM (NYSE:GM) recently announced its partnership with the LG Group for jointly designing and developing electric vehicles (EV). [1] LG already supplies battery cells for Chevrolet Volt and Opel Ampera extended-range EVs. This agreement will help GM expand the number and types of electric vehicles it makes and sells using LG technology and provide significant upside for the stock. GM competes with other global automakers like Ford (NYSE:F), Daimler AG (NYSE:DAI), Honda (NYSE:HMC), Toyota (NYSE:TM), Hyundai (SEO:005380) and Nissan (PINK:NSANY).

We currently have a Trefis price estimate of $31.70 for General Motors’s stock, which is around 40% above the current market price.

Relevant Articles
  1. Down 12% YTD Will General Motors Q3 Earnings Help It Rebound?
  2. Rising Volumes And Cooling Inflation Will Drive GM’s Q2 Results
  3. What To Expect From GM’s Q1 Earnings?
  4. What’s Next For GM After A Solid Q4?
  5. Company Of The Day: General Motors
  6. With Deliveries Picking Up, How Will GM Fare In Q3?

Electric Vehicles: The new frontier for automotive industry

High gasoline prices, increasing environmental awareness along with government subsidies are helping expand the market for electric vehicles. As EV technology development advances, this market is expected to continue to expand rapidly. Therefore all major automobile manufacturers are focusing upon developing electric vehicle technology so as to gain first-mover advantage and increasing market share. Agencies, such as Environmental Protection Agency (EPA) and the Department of Transportation (DOT), are considering a number of incentive programs to encourage early adoption and introduction into the marketplace of advanced technologies, which will further accelerate electric vehicle sales. [2]

Need to meet higher fuel-efficiency standards

U.S. fuel-efficiency standards will soon become more stringent, aiming to achieve fuel economy of 54.5 miles per gallon for cars and light-duty trucks by Model Year 2025. ((ref:2)) In the near-term, fuel efficiency requirements is raised to 35.5 mpg for Model Years 2012-2016 vehicles. All automobile manufacturers are gearing up to meet these standards and electric vehicle technology is central to achieving these aims. Two major auto-manufacturers, Ford and Toyota also recently concluded an agreement for sharing and developing their hybrid vehicle technology together. [3]

Potential upside from increasing market share

GM’s ability to make and market more types of electric vehicles rapidly after this partnership should help it expand its cars’ and trucks’  market share in U.S. leading to further upside to its stock price.

You can drag the trend lines in the modifiable charts above to see the impact of these trends on GM’s stock value.

See our complete analysis for General Motors

Notes:
  1. GM and LG to Jointly Develop Electric Vehicles [↩]
  2. President Obama announces historic 54.5 MPG fuel efficiency standard [↩]
  3. Toyota, Ford to collaborate on hybrid trucks [↩]