In Focus: GM & Ford, Opportunity Missed
This week GM (GM) debuted the Lyriq, it's electric Cadillac sports utility vehicle. Again, an American car company not named Tesla (TSLA) has put out a mockup of a good looking electric vehicle coming soon to a dealership near you. That last sentences is written with a lot of doubts on my part.
Cadillac has succeeded in bringing an EV to market in the past, which should be noted. In 2014 Cadillac released the $75,000 Cadillac ELR coupe. The ELR's run was short lived because its purpose and pricing were flawed. The ELR's high sticker price was a way for GM to recoup the costs of developing its Voltec plug-in technology. The high price didn't translate into a better driving experience or an EV that was better than the competition.
Ford (F) has been no better over the past five years, annually dropping a headline about it's investment in electric vehicles, but releasing mainly hybrid vehicles.
I've been confused by both GM and Ford's strategy on electric vehicles. Tesla for the most part has done all of the heavy lifting. Tesla has shown the auto industry that consumers are ready to own electric vehicles, some consumers want EVs to save the planet, others for economic reasons. But no matter the reason, there is a demand, and GM and Ford have been slow to adopt their businesses to meet the demand.
On August 3, 2020 Lordstown Motors CEO Steven Burns helped to clear up my confusion on GM and Ford in his interview with CNBC. When asked if he is worried about an electric F150 from Ford, the CEO stated.
... Imagine Ford coming out with the Ford 150, they're not likely to say, "Buy this electric 150, don't buy our gas one, it spews stuff out the tailpipes out the back, so they're really kind of compromised."
Burns' statement made it all make sense to me. GM and Ford are still beholden to big oil, and this relationship has prevented both companies from putting the focus on EVs that they should have.
There are more than a half-dozen companies working on electric vehicles in the U.S.. These companies are actively developing their EV platforms and more importantly are all in on electric vehicles and making their businesses work around emissions free transportation.
After several years of trying to figure it out and not quite getting it when it comes to electric vehicles, it's time for GM and Ford to switch strategies. They need to acquire one of the upstart EV companies, and they need to do so quickly.
An acquisition of an EV company by GM or Ford, would signal to the markets that both companies are ready to put the focus on electric vehicles and the future of their respective companies.
Both GM and Ford are attempting to hedge through investments. GM recently invested $75 million in Lordstown Motors and Ford invested $500 Million in Rivian. But even if Lordstown Motors and Rivian are Tesla sized successes, their contributions to GM and Ford will only offset GM and Ford's internal EV blunders.
Lordstown is focused on full-sized electric pickup trucks for fleets and working men and women, a market that isn't being catered too yet by other EV companies. Lordstown Motors purchased an old GM plant in Lordstown, Ohio and believes it will be ready to deliver its trucks in a year from now.
Before Steve Burns' CNBC interview I used to wonder why GM or Ford didn't acquire Lordstown Motor and make Lordstown the electric vehicle part of their business? The same question goes for Nikola (NKLA), why didn't GM or Ford make an attempt at a Nikola acquisition? In either case Lordstown or Nikola for GM or Ford could have been what Instagram is to Facebook. But it is likely that both GM and Ford saw cheap oil prices as a reason to continue pushing traditional automobiles instead of moving the company towards the future.
For GM and Ford investors the good news is neither company is going out of business. The bad news is neither company in its current state makes a great long term investment. If EVs are the future, and companies like GM and Ford won't move their companies towards the future, then it doesn't make sense for investors to expect great gains from either company. It would be like investing in the horse-and-buggy after the Model T was invented.
So far I would define GM and Ford's electric vehicle strategy as missed opportunities. Investors can only hope that GM and Ford finally carry out their highly publicized but badly executed EV strategies, or that both companies get smart and acquire a company already dedicated to making electric vehicles.