What happened
January wasn't a good month for stocks in many tech and growth sectors. Electric vehicle (EV) names were some of the hardest hit. General Motors (GM -0.74%) has been accelerating its transition into EVs and trying to convince investors of its place in the burgeoning EV sector. That thinking goes both ways, however, and GM shares dropped along with pure EV names like Lucid Group (LCID 0.77%) and Chinese EV maker Nio (NIO 1.74%) last month. For the full month of January, GM shares moved down 10.1%, while Lucid and Nio stocks both dropped about 23%, according to data provided by S&P Global Market Intelligence.
So what
To be clear, GM isn't yet an EV company. But it has announced it will invest $35 billion through 2025 to grow its EV and autonomous vehicle (AV) businesses.
GM's Factory Zero will make its electric Hummer and Silverado pickup. Image source: General Motors.
Its relative outperformance in January versus pure EV plays reflects the fact that it has an established legacy automotive business. Lucid hasn't yet proven it can even manufacture at scale, as it only just began shipping its electric Air sedans last fall. Nio has cumulatively delivered more than 175,000 EVs as of Jan. 31, 2022, but it has yet to show a profit. Though at different stages of development, all three stocks were hit in January as the prospect of rising interest rates and inflation affected names related to growth and tech.
Now what
GM announced its largest single investment in its long history in January. It committed $7 billion to accelerate its move into electric vehicles, significantly increasing its battery cell and electric truck production capacity in Michigan. The investment will create a new battery cell plant for its Ultium battery cell technology, as well as to convert an existing assembly plant for building electric versions of the Chevrolet Silverado and GMC Sierra pickup trucks. GM CEO Mary Barra has stated that she expects the company to become North America's EV market leader by 2025.
But with current leader Tesla expecting approximately 50% growth after having delivered 936,172 electric cars globally in 2021, investors are still waiting before valuing GM like a fast-growing, pure EV company. For now, that's probably a good thing, as the high valuations assigned to names like Lucid and Nio led to outsize drops in the stocks last month.
Nio has several growth triggers planned for 2022. It has been working to double its manufacturing capacity to at least 240,000 vehicles per year and has announced two new sedan models that are expected to begin deliveries this year. It also expanded outside China for the first time in 2021, establishing its business in Norway. Nio now plans to move into other European markets in 2022.
But Nio and Lucid already both have market caps of more than $40 billion, even after the January stock plunge. Some investors will likely look at the decline as an opportunity, while others may see it as a sign that the companies were simply overvalued. What is clear is that the EV landscape is still evolving for investors, and now legacy automakers like GM are being included in it.
