Morgan Stanley Directly Inquires with GM CEO: What is the Strategy for Profiting from EVs When Tesla is Facing Challenges? | Carscoops

      GM faces challenging inquiries following its quarterly earnings announcement

      7 hours ago

      

      by Brad Anderson

      This quarter, GM reported a $1.1 billion loss due to President Trump’s tariffs.

      CEO Mary Barra stated that the emphasis on automation is aimed at improving factory efficiency rather than developing AI-driven vehicles.

      Piper Sandler indicated that GM requires strategic changes to remain competitive in the AI age.

      As the automotive sector transitions towards electrification, traditional companies like General Motors are grappling with difficult questions concerning profitability, innovation, and long-term strategy. Although GM's leadership suggests a shift towards automation, some investors are doubtful about the company's ability to succeed in the electric vehicle market, particularly as even Tesla, the industry leader, struggles with profit margins.

      While GM recently surpassed Wall Street's quarterly earnings predictions, the financial figures painted a more complex picture. Profits for the second quarter plummeted year-over-year from $2.9 billion to $1.9 billion. Compounding the challenges, the company incurred a $1.1 billion loss linked to President Trump’s tariffs, placing additional strain on its financial health.

      Concerns Regarding EV Profitability

      Amid these challenges, Morgan Stanley analyst Adam Jonas queried GM CEO Mary Barra on how the company plans to profit from its electric vehicles when it appears Tesla, despite its extensive investments in AI and autonomy, is finding it difficult to do so.

      “Elon seems to be exiting the auto industry, clearly withdrawing capital from the sector and focusing on AI, autonomy, and robotaxis,” Jonas remarked. “How does GM anticipate achieving profitability with EVs when companies like Tesla seem unable to?”

      Focus on Factory Automation, Not Tesla’s Model

      Barra noted that GM is exploring various partnerships within the automation sector, as reported by Fortune. However, she emphasized that the primary goal is to enhance efficiency in its manufacturing plants, indicating that GM has little interest in transforming into a tech-centric enterprise like Tesla. Essentially, GM is focused on optimizing factories rather than developing advanced vehicles.

      “Overall, we’re concentrating on what will enhance manufacturing optimization,” GM’s CEO stated.

      Criticism of GM's Strategy

      GM's approach has also faced scrutiny from Piper Sandler analysts, who do not foresee the automaker breaking free from its relatively low valuation, which currently stands at about five times next year's estimated earnings. “In our opinion, if GM and other legacy automakers wish to prevail over their prolonged struggles, they require not just smart strategies but bold strategic transformations,” the firm commented.

      Tesla’s Valuation and Business Model Perspective

      In contrast, Piper Sandler believes Tesla’s valuation, which is 140 times its forecasted 2026 earnings, is justified largely due to its vigorous foray into AI and robotics. The focus now extends beyond vehicles; it encompasses the potential for an entirely new business model. Currently, GM seems to be adopting a more cautious approach.