GM to Form JV for EV Batteries, Raises 2021 Outlook

Multinational automotive manufacturing company General Motors Co. (GM) plans to form a joint venture with a South Korea-based chemical firm for the production of critical materials needed for the batteries of electric vehicles (EV), a report published by CNBC said.

Don't Miss Our Christmas Offers:

Discover the latest stocks recommended by top Wall Street analysts, all in one place with Analyst Top Stocks
Make smarter investments with weekly expert stock picks from the Smart Investor Newsletter

Headquartered in Michigan, GM is engaged in the design, manufacturing, and sale of cars, trucks, and automobile parts. Its brands include Chevrolet, Buick, GM and Cadillac.

Shares of the company were trading 1.6% higher, at the time of writing, in the early trading session on Thursday. (See Insiders’ Hot Stocks on TipRanks)

Details of the JV

GM and South Korea’s Posco Chemical have signed a nonbinding term sheet and plan to execute definitive agreements soon.

Under the JV, the companies plan to open a new production plant in North America in 2024. The facility will process critical battery materials like cathode active material (CAM) for GM’s EVs.

With this move, General Motors aims to control its supply chain and reduce the chances of future disruptions as the world continues to grapple with a shortage of semiconductor chips.

Management Comments

The Executive Vice-President of Global Product Development, Purchasing and Supply Chain at General Motors, Doug L. Parks, said, “This is going to be a pretty significant investment for both GM and Posco.”

Outlook Raised

Meanwhile, according to a report published by Business Today, the Detroit-based automotive giant has raised the outlook for 2021, Paul Jacobson, the company’s CFO, said during a presentation.

GM expects adjusted pre-tax profits to total around $14 billion, higher than the earlier announced guidance range of $11.5 billion to $13.5 billion.

Jacobson said, “GM’s financial performance is benefiting from strong consumer demand, high prices for new vehicles and more stability in supplies of semiconductors. However, GM’s vehicle production and inventories won’t get back to normal until late 2022.”

Wall Street’s Take

Last month, Wedbush analyst Daniel Ives maintained a Buy rating on the stock with a price target of $85 (46.4% upside potential).

In a research note, the analyst said, “Despite headwinds in the form of near-term supply and chip shortage issues, GM has a golden opportunity to ultimately convert 20% of its installed customer base to EVs by 2026 and covert over 50% of its customer base by 2030.”

“We believe in a bull case scenario and GM’s stock could hit $100 over the next 12 to 18 months as the EV vision begins to take shape,” Ives added.

“GM is in a great position to take advantage of a $5 trillion market emerging over the next decade as the automaker develops game-changing battery technology under the Ultium Platform,” he said.

Overall, the stock has a Strong Buy consensus rating based on 11 Buys and 1 Hold. The average General Motors price target of $74.33 implies 28% upside potential. Shares have gained 43.3% year-to-date.

Website Traffic

TipRanks’ Website Traffic Tool, which uses data from SEMrush Holdings (SEMR), the world’s biggest website usage monitoring service, offers insight into GM’s performance.

According to the tool, compared to the previous year, the company’s website traffic registered a nearly 25% decrease in global visits in October. Moreover, the website traffic has declined 7.1% year-to-date against the same period last year.