What happened
Shares of General Motors (GM 1.68%) were falling on Wednesday, after Goldman Sachs' new auto analyst said that the company is not particularly well positioned for growth after the coronavirus pandemic fades.
As of 2:35 p.m. EDT on Wednesday, GM's shares were down about 5.2% from Tuesday's closing price.
So what
Goldman Sachs has a new auto analyst, and he has strong views about the future of the U.S. auto industry. Mark Delaney, who previously followed semiconductor stocks for the bank, initiated coverage of GM with a rating of hold in a note that took a broad look at the state of play in U.S. autos.
Delaney's near-term concern about GM is easy to understand: With its factories in North America closed amid the pandemic, GM is burning quite a bit of cash. While the company has taken prudent steps to conserve cash in the near term, it's going to be an expensive couple of quarters for the Detroit auto giant.
Apparently Goldman Sachs isn't impressed with GM's electric-vehicle platform. Image source: General Motors.
I suspect that few auto investors will have any argument with that. But Delaney then goes on to opine that in the longer term, GM is at a disadvantage to (wait for it) Tesla (TSLA 4.51%).
Goldman's new global automotive team expects electric-vehicle (EV) penetration to rise to nearly 15% of the market by 2030, from just 2% last year, which is plausible. Delaney takes a leap from there to argue that Tesla has a big lead over other automakers in manufacturing EVs, and that he expects the company to maintain a hefty share as the overall market grows.
Needless to say, Delaney rates Tesla as a buy, with a Wall-Street-high target price of $864.
Now what
I agree with Delaney's sense that GM has ample cash to ride out the pandemic, that it will have less cash afterward than it did before, and that it will take awhile to recover.
But as for the EV gold rush, I have to wonder how closely he has looked at GM's (extensive, advanced, and very well-funded) EV plans -- and for that matter, at Tesla's available cash and likely burn rate while its own U.S. factories are closed.
Whether Tesla has the cash to ride out the pandemic is a question for another time. But right now, Delaney's note seems to be why GM's shares are down (and Tesla's aren't) on Wednesday afternoon.
