Pros and Cons of Investing in General Motors

PHOTO CREDIT: GM

OVERVIEW

General Motors Company is a company based in the United States. The company designs, manufactures, and sells automobiles around the world. The company operates under Chevrolet, Buick, Cadillac, and many other car brands. The company also offers maintenance and financial services related to the auto business. The company was founded in 1908.

PROS:

1. General Motors is a great reopening play in an investor’s portfolio. As people become more mobile again, the demand for cars will rise. In addition to this, many COVID-19 headwinds (like low demand and supply chain issues) will stop hurting the company as the pandemic comes to an end. This will also benefit investors in the company.
2. General Motors is one of the largest companies in the automobile industry. This scale has helped the company get good deals on parts with suppliers and has also helped the company grow into new markets. It has benefited the company’s innovation into the EV industry as well. This scale will benefit the company and its investors.
3. General Motors has bet big on the rise of electric vehicles. The company has pledged to sell only 100% electric vehicles by 2030. Electric vehicles are no doubt the future of the auto industry, and General Motors seems to be prepared to capitalize on the new demand for these vehicles. This will also benefit investors in the company.

CONS:

1. The company faces tough competition in the auto industry. Some of these competitors include Tesla, Ford, Toyota, Honda, and Daimler. This competition might hurt the company and its investors in the future.
2. As General Motors goes into the electric vehicle industry, it has to face tough competition from the largest electric vehicle company in the world, Tesla. Tesla already has quite a jump from other company’s like General Motors who still have high exposure to ICE vehicles. Tesla has the opportunity to become the largest car company in the world, something that will hurt GM.
3. The chip shortage has negatively impacted General Motors. The company is unable to obtain critical parts due to supply chain issues. This has caused the company to shut down most of its production in US plants and at other manufacturing facilities around the world. This has hurt the company and its investors in the short to mid-term.
4. General Motors has had a history of having an underperforming stock. Until the stock price soared due to its investments in the electric vehicle industry, the company’s stock price has been flat over the past couple of years due to lackluster results and other issues with the balance sheet. If you are looking for a high-flying investment option GM is not a great option for you.

MY OPINION

I think that General Motors is an ok long-term investment due to its position as a good reopening play, a large business/scale, as well as investing heavily into the electric vehicle industry. However, tough competition, competition from Tesla, a global chip shortage, as well as an underperforming stock might hurt the company and its investors in the future.