There’s no question that Tesla (NASDAQ:TSLA) dominated 2020.
Shares of the leading electric vehicle maker jumped more than 700% as investors saw a tipping point in the electrification of the auto sector, and Tesla also hit its goal of delivering 500,000 vehicles while expanding production worldwide. There were plenty of other winners in the EV boom, including Chinese EV maker NIO and Workhorse Group, a maker of electric trucks. Electric and fuel cell supply chain stocks like Plug Power, Bloom Energy, and Beam Global surged as well.
However, something surprising is happening in 2021: Detroit is making a comeback. After years of underperformance, General Motors (NYSE:GM) and Ford (NYSE:F) are both rallying, and the legacy automakers have outperformed Tesla this year, as the chart below shows.
What’s happening with these auto stocks? Let’s take a look at why the Detroit automakers are suddenly back in vogue.
A new GM
For years, General Motors seemed to have the components to make the leap into the next generation of auto manufacturing, but didn’t get any credit for it. The company’s Cruise autonomous vehicle division was valued at $19 billion in 2019 and GM was making electric cars as early as 1996 with the EV1, while the plug-in hybrid Chevy Volt debuted in 2010, soon followed by the all-electric Bolt.
However, as an incumbent, GM seemed to have more to lose than gain from the rise of EVs, and it disbanded the EV1 because it didn’t see a path to profitability.
That perception now seems to be changing. Last November, GM said it would have 30 EV models by 2025, and that it would invest $27 billion in EVs and AVs (autonomous vehicles) by 2025, up from a previous commitment of $20 billion. That’s more than the company plans to invest in internal combustion vehicles vehicles.
This year, the pace of those announcements has accelerated. On Jan. 8, the company announced a rebranding and a new marketing campaign to underscore its goal of accelerating “mass adoption of electric vehicles.” On Jan. 12, the company unveiled a new business called BrightDrop, a suite of electric vehicles, software, and services for delivery and logistics companies, ranging from an electric pallet to an electric truck with 600 cubic feet of cargo space.
Finally, the Chevy-maker said it had entered into a long-term strategic relationship with Microsoft to accelerate the development of its self-driving vehicles. As part of the tie-up, Microsoft participated in a $2 billion funding round that brought Cruise’s valuation to $30 billion.
All of these moves show GM fast pivoting away from its perception as a stodgy automaker, and responding to the market premium on EVs and AVs. Wall Street has taken notice as well — GM has received several upgrades in January, helping to boost the stock price.
Full story on Fool.com
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