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General Motors stock price gains after going all-in on electric vehicles

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Shares of the U.S. automaker General Motors (NYSE: GM) soared nearly 4% yesterday after the company said it will pull out of the legal battle to ban California from setting its own fuel economy standards.  

Fundamental analysis: All-in on EV

The company sent a letter to environmental groups to inform them about the decision to drop support for the lawsuit. Instead, CEO Barra said the carmaker will support efforts of president-elect Joe Biden to increase the use of electric cars. 

“We believe the ambitious electrification goals of the President-elect, California, and General Motors are aligned, to address climate change by drastically reducing automobile emissions,” Barra wrote in a letter.

Other carmakers that backed Trump, such as Toyota, are considering their next steps. 

“Given the changing circumstances, we are assessing the situation, but remain committed to our goal of a consistent, unitary set of fuel economy standards applicable in all 50 states,” Toyota wrote in a statement.

Along these lines, GM committed to increase investments in EV technology. It is also said that it is now working to produce a new battery chemistry to reduce costs of producing EV cars.

This prompted analysts to raise their outlook on GM, with Morgan Stanley analyst Adam Jonas raising the price target to $53.00 per share from prior $44.00.

“No hybrids. No Europe. Allocating $27bn towards EV investment by 2025 with a plan to launch 30 EV models by 2025. GM expects cost parity of ICE & EV by mid decade with 1 million EVs by 2025 and EV costs down 60% by mid-decade. GM has a head start vs. other legacy OEMs in the race for EVs at scale and a clear strategy to get there,” the analyst said in a note sent to clients.

Technical analysis: New record highs almost printed

Yesterday’s high of $46.71 came just shy of the all-time high of $46.76 printed over 3 years ago. GM share price has been on a tear since August to gain about 85% in less than four months. 

GM stock daily chart (TradingView)

Buyers seem determined to push the price action towards fresh record highs. What may follow, in that case, is profit-taking that will create a pullback in the stock towards the low $40s.

Summary

General Motors said it will not support the Trump administration in the lawsuit against California and will insated increase its investments in EV production. 

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