Investors finally reward General Motors’ shift to EVs even as it cuts emerging mobility plans

As ride-hailing companies Uber and Lyft rose to popularity and e-scooters popped up across major U.S. cities earlier this decade, industry analysts predicted the beginning of the end of car ownership.

That meant “traditional” automakers such as General Motors would have to evolve or die.

In an effort to spur its lagging stock price and combat such exaggerated claims, GM made a series of investments beginning in 2016 that executives believed would position it as a “mobility” company instead of the aging dinosaur Wall Street saw. It started a shared mobility brand called Maven, launched a vehicle subscription service, purchased an autonomous vehicle company and even designed and developed e-bikes. It also took a 7.8% stake in Lyft.

Some of the deals temporarily juiced the automaker’s share price. But the gains never lasted, and Wall Street has barely seemed to notice as GM tosses many of those high-profile mobility initiatives aside.

Instead, investors have been focused on the automaker’s leaner, more efficient core business operations – something executives such as GM CEO Mary Barra and GM President Mark Reuss have touted for years in the company’s shift to electric and autonomous vehicles. It appears they just needed a global health pandemic to prove it. Where other automakers have struggled, GM has profitably navigated through the coronavirus pandemic so far, and its investors have been rewarded.

“For many years when people said what is it going to take to get the stock moving? Eventually, I had to say – it sounds perverse – but we might actually need to see a recession,” Morningstar’s David Whiston told CNBC. “Then GM can finally prove to the market that ‘Hey, all these years we have been saying we’re not like ‘old GM’ and we really are different … now we have a chance to prove it.’ I think they have proved it.”

GM’s stock hit an all-time low on March 18 after it temporarily closed all U.S. factories due to the coronavirus. The shares have since rallied as the automaker easily beat Wall Street’s earnings expectations in the second and third quarters. Announcements around increasing and accelerating its EV efforts, including the GMC Hummer EV, have boosted the share price as well.

“They have good fundamentals, upside in numbers but also what’s helping is the EV narrative is accelerating,” Credit Suisse analyst Dan Levy told CNBC. “Overall, a positive news cycle on their endeavors in this area, I think, is helping. It’s a combination of both of those that help.”

Levy, who has an outperform rating on GM, said the automaker’s performance during the second quarter during the depths of the pandemic was solid proof of how its restructuring efforts would help in a downturn – a major argument of bears of Wall Street.

Shares of GM are up 157% since their low in March, including an 18% jump in November so far. The stock hit a new 52-week high Wednesday of $44.13 a share just before the automaker announced it was upping its investment in electric and autonomous vehicles by 35% to $27 billion through 2025.

Not everyone is buying into GM though. CFRA Research has a “sell” rating on the Detroit automaker largely based on the cost of switching its vehicle fleet to all-electric and its ability to compete against Tesla, which accounts for roughly three of every four EVs sold in the U.S.

“They’ve done a good job cutting costs and now their top-line has really improved from the depths of where we were 6 months ago, so that’s a positive, but we argue that the stock’s also had an incredible rebound,” said Garrett Nelson, senior equity analyst at CFRA Research. “A lot of that, in our view, is already discounted in the current share price.

“Now, investors really have to weigh the reality of this pivot to electric vehicles. It’s going to be very difficult we think.”

GM isn’t fully conceding its mobility efforts but aside from Cruise, they’ve taken a backseat to EVs and more traditional (and profitable) business such as re-entering auto insurance, which the automaker announced earlier this week.

The coronavirus pandemic was the last nail in the coffin for its Maven mobility brand, which the company has said it “learned” a lot from but was never profitable. It was GM’s first significant foray into the car-sharing and mobility space in 2016. After rapidly expanding operations, including the addition of peer-to-peer sharing of vehicles and as a fleet to Uber and Lyft, the program’s prominence faded.

A less-known endeavor by GM to produce compact and foldable electrified bicycles called Ariv also was eliminated during the coronavirus pandemic in April. Announced in late-2018 as a “last mile” solution for commuters — a concern cities and companies have looked to address in different ways for years.

Prior to the pandemic, the automaker announced it would cease operations of its Book by Cadillac vehicle subscription program. The service essentially allowed for short-term leases of Cadillac’s entire lineup with white-glove delivery and pickup services for a set cost.

A new version of Book by Cadillac was expected to launch earlier this year, but GM says that was delayed due to the coronavirus pandemic. A company spokeswoman said internal discussions about the program “are ongoing” but she declined to disclose when its launch may be rescheduled.

The lone survivor of GM’s mobility efforts, Cruise, continues to work on the development and deployment of automotive vehicles, largely based in California. After indefinitely delaying the launch of a robotaxi fleet last year for San Francisco, the company recently announced a new partnership with Walmart in Arizona and was approved to begin testing unmanned autonomous vehicles in California.