VALUATION HIGHLIGHTS

1. GM North America constitutes 54% of the Trefis price estimate for General Motors's stock.
2. Automobile Leases & Loans constitute 28% of the Trefis price estimate for General Motors's stock.
3. GM China constitutes 11% of the Trefis price estimate for General Motors's stock.

WHAT HAS CHANGED?

1. Latest Earnings

GM posted a better-than-expected set of Q4 2023 results. Revenue during the quarter remained roughly flat year-over-year at $42.98 billion, while adjusted earnings stood at $1.24. GM's outlook for 2024 is strong, with earnings projected at between $8.50 to $9.50 per share. This is despite the higher costs associated with new union contracts.

2. GM's electric vehicle push

GM's electrification plans are also gaining traction. The company has indicated that it could sell one million electric vehicles each year in North America by 2025, and it is making progress toward this goal. In September 2022, rental car major Hertz announced plans to order as many as 175,000 EVs from GM over the next five years.

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 $33,000 in 2019 to $44,000 in 2022. Trefis expects the metric to rise marginally going forward to about $45,000. However, if the metric rises to about $50,000, there could be a 10% upside to our price estimate. On the other side, 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 the third-largest automaker in the world in terms of the number of vehicles sold. GM commenced operations on July 10, 2009, after it substantially acquired all 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 sells 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

China, where GM operates through joint ventures, is the most valuable division of the company. Its U.S. operations come a close second.

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 size in developing countries continues to increase, additional international and domestic competitors will seek to enter these markets, and existing market participants will act aggressively to increase their market share. Increased competition may result in price reductions, reduced margins, and GM's inability to gain or hold market share.

In response, GM aims to pursue local and regional solutions to meet specific market requirements while improving its share in important markets, including South Korea, South Africa, Russia, India, and the ASEAN region.

Concentrated design and engineering resources on fewer brands and architectures

GM manufactures more than half of its vehicles on 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.
• Partnering with ride-sharing service provider Lyft to develop a solid competitor to Uber.
• 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.