Is General Motors a Good Investment?
General Motors Company is an automobile manufacturer based in the United States. It operates under the Buick, Cadillac, Chevrolet, GMC, Holden, Baojun, and the Wuling brands. The company makes sedans and trucks and other vehicles. They sell these vehicles along with their financing plans all around the world. The company was founded in 1908.
Why You Should?
- After the company saw a drop in demand due to the coronavirus, the company saw a quick rebound in sales, seeing strength in truck sales. This quick recovery in the automotive industry will benefit the company and its investors.
- The COVID-19 Pandemic has boosted the demand for cheap vehicles in the United States and around the world as consumers do not want to take public transport. Consumers also do not want to take ride-sharing services due to fears of contracting the coronavirus.
- General Motors and other auto manufacturers perform better when there is a strong economy. General Motors is a great reopening play because of these operating performances during times of a strong economy as consumers and businesses look to improve their fleets of vehicles. This will benefit the company and its investors.
Why you Should Not?
- General Motors faces tough competition across all of its markets that it operates in. Some of these traditional names include Ford, Fiat-Chrysler, Toyota, and many others. There are other non-traditional companies like Tesla and Rivian, both of which are taking market share from General Motors. This tough competition might hurt the company.
- The trade war caused by this administration has hurt the operating costs as General Motors saw a rise in costs to manufacture vehicles in the United States. The company has also seen rising prices for individual vehicles because of this. These trade issues might be solved under a Biden presidency, which will be advantageous for struggling companies.
- The board of directors of General Motors did not start developing EV vehicles until it was too late. All of their vehicles, though fuel-efficient, have been blown away by Tesla. Though the company still sells more vehicles, these volumes have slowly started to fall and when Tesla comes up with an affordable EV, General Motors is in trouble. This will hurt the company and its investors.
- General Motors has seen falling revenues and profits over the past couple of years as the company needed to shut down factories due to weaker and weaker demand for some of their vehicles. This will hurt the company’s ability to grow in the future and will also hurt its investors. In the financial year of 2019, the company reported revenues of around 137.24 billion and profits of around 6.73 billion. Both of these metrics are lower than what the company reported in the financial year of 2018 when they had revenues of around 147 billion and profits of around 8 billion.
In my opinion, I think that I would wait before putting money into General Motors due to the falling vehicle volumes, the trade tensions, tough competition, and several threats. They have shut down several of their plants due to the competition. However, the company has seen strong demand for its trucks and has seen demand slightly stabilize from the COVID-19 Pandemic.