The EV race in America is heating up as competition for resources and tax breaks has started to really show up in quarterly earnings reports across the industry. While we're still bullish on our Ford stock strategy (read that here) their negative 102% margin on their EV business during their Q1 earnings call was a huge wake-up call.
Worldwide, the push to compete with Tesla's market dominance and margins is going to be very expensive in the short term. While brands like Porsche and Mercedes will be able to lean on luxury branding (especially with Tesla signaling they are pulling away from a luxury-first strategy), companies like Ford will potentially need a few years of cost-cutting to achieve some level of parity.
This brings us to our newest addition to our auto portfolio: General Motors ($GM).
We're going overweight in GM precisely because they are not being as aggressive in the EV space and are instead leaning on the continued value of their internal combustion engine (ICE) vehicles for the time being.
While the whole world is rapidly transitioning to EVs, there's still a lot of old-school money to be made, and GM is looking a little oversold as the market discounts the value of traditional ICE vehicles.
GM's strategy is one relying on patience and partnerships. While they are set to make a lot of money the old way and are moving into EVs at a safer pace, they also have a solid group of sub-brands that are making them competitive in all aspects of the shifting paradigms we see in the auto industry.
There's a lot of great details here, but the headline is that sometimes a great defense is the best offense. Let's jump into it 👇