How Sensitive Is General Motors’ Valuation To Revenues From China

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China is a strong growth driver for General Motors (NYSE:GM) and according to our estimates, this division accounts for nearly 35% of the company’s valuation. This interactive model enables us to identify the impact of revenues from China on General Motors’ valuation:

While North America is the largest region for General Motors and the company derives maximum revenues from this region, we do not expect revenues from this region to increase in the next few years, given the changing consumer preferences towards SUVs and the declining passenger car market. International regions including South America do not contribute significantly towards General Motors’ revenues.

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Revenues from China come in the form of equity income, since General Motors operates in the region via a joint venture. This income is much higher compared to the gross profit from international markets and South America.

There can be a nearly $2 billion decline in General Motors’ valuation if there is no growth in the equity income from China. If the income from China declines at a steady pace over our forecast period, there can be a nearly $5 billion decline in General Motors’ valuation.

You can click here to modify the income from China and quantify its impact on General Motors’ valuation and stock price.

 

 

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