Finally! It's been nearly two weeks since General Electric
Thursday night, GE announced that its initial buy-in to the Electric Revolution will total approximately 25,000 cars. Beginning next year with the first tranche of a 12,000-Volt purchase from soon-to-IPO-General Motors, GE will gradually up its purchases over the next five years. To obtain 25,000 vehicles, GE will also probably need to expand the list of vendors to include Nissan's Leaf, Ford's
Why would GE spread its bets, and its wallet, so widely? Well, consider: GM tells us it aims to produce just 10,000 Chevy Volts in 2011, while its rivals plan similarly slow ramp-ups. So GE really has little choice in the matter -- buy too many cars from any one manufacturer, too quickly, and it would clean out the company's inventory instantly.
General Electric: a business incubator
On the other hand, by giving a lower level of buying support, spread out over time and across the industry, GE will support the development of an electric infrastructure -- an infrastructure that GE itself aims to dominate. Already, GE owns a 10% stake in car-battery maker A123
And, in fact, GE's buy-in has already expanded the market. To make up for the number of Volts that GE is claiming, GM says it may up its production rate as needed, to ensure that GE's move "won't reduce the number of Volts available to the public." I think it's a safe bet GE's other soon-to-be-suppliers will respond similarly. What's more, GE management tells us that its various electrical ventures stand to send $0.10 back to the company for every $1 worth of electric cars sold worldwide.
Shockingly good news for GE shareholders.
See a stock in this story you'd like to follow? Add it to My Watchlist, which will find all of our Foolish analysis on it.
Fool contributor Rich Smith owns no shares of any company named above.
Ford and FedEx are Motley Fool Stock Advisor selections. PepsiCo is a Motley Fool Income Investor selection. Motley Fool Options has recommended a diagonal call position on PepsiCo. The Fool owns shares of FedEx.
True to its name, The Motley Fool is made up of a motley assortment of writers and analysts, each with a unique perspective; sometimes we agree, sometimes we disagree, but we all believe in the power of learning from each other through our Foolish community. The Motley Fool has a disclosure policy.