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Will GM’s Rumored Electric Hummer Let the Air Out of Tesla’s Tires?

Last Updated September 23, 2020 1:11 PM
Laura Hoy
Last Updated September 23, 2020 1:11 PM

After a trying month due to labor disputes, American automaker General Motors (NYSE:GM) looks likely to be on the upswing ahead of it’s Oct. 29 Q3 results. GM seems to be in the final stages of wrapping up a deal with the United Auto Workers union, which has helped the stock recoup some of the value it lost following the UAW strike announcement  in mid-September. However that wasn’t the only good news to come out of the ordeal—in the process of negotiating a new labor agreement, the UAW revealed promising details regarding GM’s future in the electric vehicle market.

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GM stock has been under pressure since unions announced plans to strike

GM’s Electric Vehicle Investment

On Friday, the UAW revealed GM’s plans  to invest $3 billion in its Detroit-Hamtramck plant as part of the firm’s push to develop electric trucks and vans. The automaker is hoping to begin production on an electric pickup truck during the second half of 2021, followed by a performance version in 2022 and an SUV in 2023.

GM is considering branding the vehicles under its Hummer name, but so far no decisions have been made and the concept is simply dubbed “Project O” among GM employees. 

GM vs. Tesla

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Tesla stock has been up and down as the firm struggles to become profitable

GM’s Project O pickup raises questions about the future for Tesla (NASDAQ:TSLA), which is planning to reveal its own pickup  in November. The Tesla electric pickup truck is rumored to have a unique, futuristic design that could put it in a category all its own.

Historically, pickup trucks have been one of the most lucrative segments  for automakers and GM, Ford (NYSE:F) and Fiat Chrysler (NYSE:FCAU) have always been at the top of that food chain. There is some question as to whether Tesla, with its limited experience and smaller size, can crack the pickup category.

Earlier in September, Credit Suisse analyst Dan Levy noted  that although TSLA does enjoy some advantages as a smaller, more specialized company, it will struggle to keep up with its larger rivals when it comes to scalability. That’s been evident in TSLA’s inability to meet the demand for its vehicles with underwhelming delivery figures . 

The same could be true when it comes to electric trucks. While Tesla is a first-mover, GM’s long history in the industry could be a major advantage. Not to mention the fact that Tesla’s rumored futuristic design  could put many potential customers off. The futuristic design looks unlike, well, any vehicle on the market, which has some asking whether that could limit its potential market. 


Bigger Problems Ahead

In the near-term, the GM rumors are unlikely to make any sizable dents in Tesla’s truck aspirations. For one thing, a GM pickup is still more than a year away from hitting the market— the company itself hasn’t even confirmed the Project O rumors. Secondly, the two look likely to be aiming at different markets. While Tesla initially made its name with high-end offerings, its pickup is said to be priced under $50,000 , which would make it accessible to more consumers. Meanwhile, analysts are expecting GM’s electric truck to come in at a price point of around $90,000, with subsequent models rising in price thereafter.

In the longer-term, competition from GM could prove a problem, especially if GM builds out its line of electric pickup trucks to include a variety of price-points. To get to that stage, though, Tesla will ultimately need to improve its profitability . The firm’s lower-priced Model 3 has been popular but at the expense of margins.

As of this writing, Laura Hoy did not hold a position in any of the aforementioned securities.

Disclaimer: The above should not be considered trading advice from CCN.com.