Should General Motors Worry More About Ford or Tesla?

General Motors (NYSE: GM  ) will release its quarterly report on Wednesday, and the automaker has done an excellent job of bouncing back over the past several years after emerging from its bankruptcy filing. Yet in plotting its long-term strategy, General Motors has to consider not only its archrival, Ford Motor (NYSE: F  ) , but also the next generation of car companies looking for innovative niches in which to prosper. In particular, Tesla Motors (NASDAQ: TSLA  ) has become a credible long-term threat to GM's business, and General Motors isn't assuming that Tesla is just a fad that will die out in short order.

General Motors still has a loyal following of customers who stick with its popular brands. In trucks, the Chevy Silverado is aimed at competing against Ford's hugely successful F-Series, while relaunches of the Impala and efforts to make the Cadillac a bigger player in the luxury space show GM's continued commitment to the car segment as well. Yet Ford has remained stubbornly competitive, and the Tesla Model S has launched to rave reviews. Let's take an early look at what's been happening with General Motors over the past quarter and what we're likely to see in its report.

Stats on General Motors

Analyst EPS Estimate

$0.93

Change From Year-Ago EPS

0%

Revenue Estimate

$39.49 billion

Change From Year-Ago Revenue

5.1%

Earnings Beats in Past Four Quarters

3

Source: Yahoo! Finance.

Can General Motors earnings race higher?
Analysts have had decidedly mixed views of General Motors earnings in recent months, cutting their third-quarter estimates by $0.03 per share but boosting their full-year projections by triple that amount. The stock's long-term gains have stalled out recently, with shares falling 4% since late July.

We've already gotten a sense of what GM's results might look like from monthly sales figures. Total sales were up 16% in July and 15% in August, with falling fleet sales volume actually holding back stronger growth in retail activity. September saw an 11% decline, but when adjusting for differing numbers of selling days compared to the prior year, General Motors posted 2% gains in adjusted retail sales. Projections for overall sales in October look favorable as well, with Edmunds.com projecting 10% gains for GM.

Positive signs from Ford's earnings release last week could also bode well for General Motors. Ford saw overall sales rise 12%, leading to record pre-tax profits and prompting Ford to raise its guidance for the full year. In particular, improvement in Europe was encouraging, as losses have finally started to narrow after persisting for years. If General Motors can see some of the same positive results in Europe, it could be exactly the good news investors need to send shares soaring.

But General Motors is also looking at Tesla Motors as a serious threat. The company will launch its 2015 Cadillac ELR coupe in early 2014, but analysts are looking most closely at the car's price tag, which at almost $76,000 is actually above the base price for Tesla's Model S. With the same drivetrain as the much less expensive Chevy Volt, the Cadillac ELR doesn't have anywhere near the electric-only range that the Model S offers, instead being a plug-in hybrid that relies on its gasoline engine for driving longer distances. New GM initiatives to produce natural-gas-powered cars like the 2015 Chevy Impala show the company's commitment to greener cars, again following Tesla's lead.

In the General Motors earnings report, look to see whether the company keeps up with Ford's pace of growth. As the auto industry gets more competitive, GM will have to up its game another level to make sure it keeps up with Ford, Tesla, and other rivals as they fight for market share in the growing global vehicle market.

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Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 28, 2013, at 10:52 AM, sagebrush52 wrote:

    Only a Motley Fool would think GM is shaking in there boots over Tesla. The F cker is in bed with Musk.

  • Report this Comment On October 28, 2013, at 11:50 AM, TMFTwoCoins wrote:

    @sagebrush52

    Really? Shaking in their boots isn't the right wording, but GM is paying close attention and are accurate in thinking Tesla is a threat.

    "We'll continue to ignore any new technology or companies that pose a serious threat to the future of our business"

    - Said no CEO ever.

  • Report this Comment On October 28, 2013, at 11:54 AM, AcuraT wrote:

    GM is not focusing on one threat, but looking at the overall market and putting resources where it thinks it needs them. They needed it to rebuild Cadillac after they invested heavily in revamping Buick (which has been growing since the bankruptcy after a decade of decline), with a "little" side bet into Tesla.

    GM is obviously reusing its one investment into the T-shaped battery platform they have been talking about for years, placing a different body on it (two doors, not four like the Chevy) and enhacing the standard options and interior to make it upscale. At first glance it does not seem very competitive with the target market offering of Tesla. How much further GM takes this initial investment from the early days with Bob Lutz who backed its initial development (with hesitation) is anyone's guess. GM is saying they are serious about this an investing in battery development - but as to how much they are investing in it is a quesiton. They will need a stronger, better attempt if they are serious about Tesla in the next few years as the initial design will probably not offer enough to get Tesla users condering a GM product.

  • Report this Comment On October 28, 2013, at 1:13 PM, damilkman wrote:

    Errr, I do not see how mixing Ford & Telsa make sense. Ford is competing against GM's ICE vechicles. People who buy EV vehicles would most likely never buy a GM vehicle anyway. Until Tesla produces an everyman car then they are not competition.

    Toyota and Honda have been positioning their development budgets for decades. It is not just GM that is not convinced there is no money in EV's yet. There is a difference between ignoring technology but also positioning a product so it is produced when the market is ready. To early is just as bad as too late.

    Not knocking Musk as I believe TSLA will succeed. But if GM were to view TSLA at the expense of the other ICE producers they would get their clock cleaned.

  • Report this Comment On October 28, 2013, at 2:01 PM, ashaskevich wrote:

    TESLA is a big time threat to GM. But is anyone looking at the big picture? $3.00/gallon gasoline that is not going down in price. Electricity that is stable price over the last 30 years.

    Unless gasoline drops to $1.25/gallon and GM makes vehicles that get 40mpg in the city ( highway does not count) then gasoline powered cars are too expensive to drive. In 2009 GM filed for bankruptcy with the feds bailing them out. There will not be another bailout.

    What will happen next time? GM needs to go full steam into electric vehicles to survive long term. When the Model E ($35,000 electric ) comes out, that will be the everyman car. The Chevy Spark is not the answer nor is the Volt.

    A 200 mile range vehicle with a supercharging network is what is needed for GM to compete with Tesla. I do not see that happening. What I do see happening is a slow decline in gasoline powered car sales with GM going bankrupt in 20 years.

  • Report this Comment On October 28, 2013, at 4:28 PM, damilkman wrote:

    GM has been getting crushed in cars for years. If anything it is Tesla verse Toyota and Honda. Every second article that is linked to Tesla is GM verses Tesla. How about a Tesla verse Toyota, Honda, BMW or Volkswagen? What is this infatuation with GM? Yes, even I can write another article about how GM stinks and has problems. Unfortunately, it is not GM verses Tesla. The question is how does Tesla stack up against the other 20some global automobile companies? A TMFer actually did write a great BMW verses Tesla article that was a good read. Tell us something we don't know! We know GM stinks.

    Regarding GM their bread & butter is trucks and to a lesser extent cross overs & SUV's. I have no clue why they ditchd the Trailblazer. Trailblazer kicks the Traverses's behind. Well, we know. Crummy company. The truck buisness has serious brand loyalty. Even when the Japanese and Germans dominated the sedan market, they could not dent trucks. It also does not hurt the Germans & Japanese did not understand trucks.

    For GM to put money into EV's other then technology is a waste of money. All that will happen is they will build a sedan that will always be behind a Japanese or German automobile. The fact that Tesla might make something superior to a GM car is "SO WHAT". Just pushes GM one step further down the line.

    The bigger question for GM is can Tesla build a working EV truck. That might require another step up in batteries technology. Then you have to get through that brand loyalty bit. A hint, selling a truck for 75K is not going to cut it or skimp out on the batteries as most truck owners are hauling heavy loads.

    Thus I repeat GM needs to protect its bread & butter not worry about EV sedans.

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