Tesla Vs GM Stock: Which Is Best?

Tesla Vs GM Stock: Tesla [NASDAQ: TSLA] was founded in 2003 with dreams to change the world through electric vehicles and renewable energy. After continuous growth throughout the 2010s, the company started 2020 strong with an $89 billion market capitalization. That’s more than both General Motors and Ford combined – in fact, the stock price more than doubled in the fourth quarter of 2019.

Not everything is rosy, however – rival GM announced it’s going all-in on electric vehicles, directly targeting Tesla’s big revenue generator. When this traditional Detroit automaker battles an ambitious newcomer, which will come out on top?

Here’s everything you need to know about Tesla vs GM as investments.

GM vs Tesla Stock: Pros and Cons

GM brands include Chevrolet, Cadillac, Buick, and GMC.

Founded in 1908, GM is over a century old and one of the largest auto manufacturers in the world. On June 1, 2009, the company filed for federal bankruptcy protection following the 2008 auto bailout of the “Big Three” automakers: GM, Ford, and Chrysler. At that point, the company had lost $71 billion from 2007-2008.

After receiving an $80 billion Troubled Asset Relief Program (TARP) government bailout and restructuring to shed unprofitable divisions, the company pulled out of bankruptcy. It quickly bounced back, earning an average of $5.4 billion each year since. It even purchased 18.6 million Class A shares in ridesharing giant Lyft in January 2016, more than doubling that initial investment upon the 2019 Lyft IPO.

Despite healthy profits, investors simply aren’t biting, with Barron’s pointing out that the company is currently trading for six times less than estimated earnings. Public perception of the American carmaker hasn’t improved since the bailout, despite its cash flow and focus on technology.

In fact, GM Cruise is the company’s autonomous car division, worth an estimated $19 billion on its own. It also has an Ultium battery that it’s using to power its own electric vehicles and licensing to other automakers looking to compete with Tesla. An all-electric Hummer was teased during the 2020 Super Bowl.

Most analysts have GM as a buy, due to strong financials, a low trading price, and its emerging electric vehicle technology. Much of this is due to declining vehicle sales and a 2019 United Auto Workers strike. Still, it has a strong 10-year forecast.

Is Tesla Stock Better Than GM?

Tesla represents the new face of American carmakers. Based in Silicon Valley, Co-Founder and CEO Elon Musk is a prominent public figure. Although a comparatively young company at only 11 years old, Tesla was ranked as the best-selling electric passenger car manufacturer in 2019.

Global sales of models including Model S, Model 3, Model X, and Model Y increased by 50% from 2018 to 2019.

In November 2019, Tesla unveiled the Cybertruck, an all-electric light commercial vehicle that’s expected to be released in 2021. Cybertruck is expected to have an estimated range between 250-500 miles.

It already has over 500,000 pre-orders, according to unofficial data. These strong sales figures are fueling investor confidence.

Electric vehicles aren’t the only products Tesla sells – its projects include the Powerwall industrial backup batteries and other power storage options created in its Giga factories.

Through its SolarCity acquisition, Tesla is also working on solar panel technology, including its solar roof. It also built a network of over 15,000 superchargers around the world to enable public EV charging.

Both Daimler AG and Toyota partnered with Tesla in the past, but by the end of the 2010s, those partnerships dissolved in place of in-house EV development. With GM now throwing its hat in the ring, Tesla’s differentiating factor of an all-electric vehicle is all but gone, leading to the question of whether it can outperform GM.

Should You Invest in GM or Tesla?

Whether you invest in GM or Tesla depends on your investment style. Each has its own pros and cons, and both have assets far beyond their automobiles. GM’s investments in Lyft and Cruise show its dedication to finding the future of transportation. Whether it’s autonomous public transportation in the form or Origin or further consumer penetration of the EV market, GM is prepared.

Meanwhile, despite being ahead in market capitalization, Tesla has never had a fully profitable year. It has profitable quarters, and we’re certainly going to be seeing numbers soon showing another one in 2020. That said, the company is still relatively young, lacks the cash flow of GM, and may not be able to pivot from its EV standing into autonomous vehicles, ridesharing, and other important automobile sectors.

Of course, Tesla isn’t fully focused on cars – it’s also interested in residential solar, and, like Apple, it could build an ecosystem of brand advocates that stick with Tesla for everything.

For short-term gains, analysts recommend Tesla, but GM still has a stronger 10-year forecast, as larger automakers push into the crowded market. There’s also the wildcard of Musk, who also founded or co-founded SpaceX, The Boring Company, OpenAI, and Neuralink. With his attention spread so thin, Tesla may suffer.

GM Vs Tesla Stock: The Bottom Line

GM and Tesla are two of the biggest car manufacturers on the planet, and they’re in direct competition with each other.

The century-old GM is a legacy company and one of North America’s most iconic brands. Although it started the 2010s recovering from bankruptcy, it now regularly turns a profit and is heavily invested in the future of vehicle technology.

Tesla is a newcomer to the automobile industry and quickly became a media sensation for making all-electric vehicles commonplace. Its charismatic CEO is known for making headlines, while the company builds what it believes to be a more sustainable future for the human race.

Each company has a different strategy to generate revenue. While Tesla’s market capitalization is higher, it lacks the revenue and profitablility of its older competitor. The ultimate winner will be decided when their next generations of electric vehicles are released.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.