General Motors Is Going for th

General Motors (GM, Financial) is a major American carmaker that has done very well traditionally. It is now evolving into electric vehicles and hybrid vehicles. However, the main focus should be on autonomous vehicles in my view, especially with new divisions looking to take on the big companies in the sector.

Over the last few months, electric vehicle stocks have been in retreat as investors move towards safer value investments. However, electric vehicles still have strong long-term prospects, and the recent sell-off could provide an opportunity to get in at a discount. Nevertheless, investors will find solace in General Motors’ ambitions in the self-driving cars market.

The company currently offers two services: Robotaxi, an autonomous vehicle fleet focused on serving people at their homes or places of employment, and Origin, which provides personalization through unique driver-less experiences.

General Motors sees a massive growth pipeline for this division, as the demand for autonomous vehicles is expected to skyrocket in the coming years. The company is already making significant investments in developing autonomous technologies, and it is well positioned to capture a large market share.

Investors might have good reason to be concerned with GM’s electric vehicle ambition. Still, I believe the expected growth in its autonomous vehicle division makes up for any losses in the electric vehicle space.

General Motors hits a roadblock on its path to an all-electric future

In recent years, GM has made a significant investment in electric vehicle technology, and it now offers a wide range of electric vehicles for consumers to choose from. The company is also working on self-driving cars and trucks as well, which it believes will revolutionize transportation in the years to come.

However, recent results highlight things are not going in the right direction. General Motors is the latest victim of the semiconductor chip shortage. The lack of chips has forced GM to slow down production on several models. In addition to the production cuts, GM also faces shortages of other key components, such as batteries. The company is working to find alternative suppliers for these components, but the process is expected to take months. In the meantime, General Motors’ electric vehicle production is suffering, and it remains to be seen how long the company can weather the semiconductor shortage.

CEO Mary Barra tried to calm investors in an analyst call after the second-quarter earnings release. The company’s first Ultium battery manufacturing facility will increase its capacity to 35 GWpH by the time the fourth quarter of fiscal 2023 rolls around. The CEO also revealed updates on the Ultium plants in Tennessee and Michigan and said the company is actively searching for a location for its fourth plant. Altogether, they will generate a total battery capacity of 160 GW.

These are positive developments. However, GM’s goal was 400,000 electric cars in 2022 to 2023. The company still has a way to go regarding fulfilling its mission, as it has delivered 7,674 electric cars this year. Even if the company ramps production massively, this goal will likely not be met within the current year.

The autonomous ridesharing market is a lucrative segment to capture

The ridesharing industry is growing rapidly, with $100 billion in gross bookings, not including delivery. This number has been estimated to grow even more when you include the likes of Uber Eats and other app-based food deliveries.

However, the ridesharing industry is a tough place to make money. A labor-intensive business model with more than 75% of costs going towards drivers isn’t ideal for any company’s ability to throw off cash for shareholders.

Uber (UBER, Financial) has predicted that its company could increase its market opportunity by 25 times if they bring prices down to $1 per mile. This might be achievable with autonomous vehicles, since after the initial cost of the vehicles and the cost of any repairs needed, the running costs would primarily consist of just fuel. Uber sold its autonomous vehicle business to Aurora (AUR, Financial) last year because of its desperate need for cash. However, Uber has invested money in Aurora to create a commercial partnership for collaboration on the investment and commercialization of autonomous vehicles.

General Motors presents a different picture. General Motors’ Cruise segment is devoted to controlling the entire value chain and getting all the revenue instead of sharing it with any third party. Cruise has been testing its autonomous driving technology for the last five years and just completed a major milestone by obtaining San Francisco’s permits to create customer-paid driverless ride services.

Last year, Cruise predicted that it would have $50 billion in revenue in six years and margins in the range of 40%. It may sound ambitious, but General Motors is in a strong position to make it happen, especially when you compare it to the incumbents in the ride-hailing market.

Takeaway

General Motors is in a unique position when it comes to ride-hailing. Although the company is not the first name that comes to mind when you think about this service, it’s making some extremely interesting moves with its Cruise division. These moves could put it in direct competition with Uber, the current leader in the ride-hailing market. However, General Motors has a few advantages that could give it the edge in this potential battle. As the ride-hailing market continues to grow, General Motors will be one to watch.