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Ford and GM Need to Provide Hard Numbers for VWAGY Like Returns

Mohit Oberoi, CFA - Author

Mar. 18 2021, Published 9:21 a.m. ET

Volkswagen (VWAGY) stock gained almost 30 percent on March 17 amid optimism about its vehicle electrification plans. Usually, such returns are associated with pure-play EV (electric vehicle) stocks like Tesla and NIO. As Ford and General Motors ramp up their EV plans, could they also see similar returns? Should you buy F and GM stocks now and bet on their EV plans?

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While automakers were slow to spot the pivot towards zero-emission vehicles, they are catching up. General Motors intends to sell only zero-emission vehicles by 2035. Ford intends to spend $22 billion on electric vehicles. While the company hasn’t committed to a hard number in the U.S., it intends to sell only zero-emission vehicles in Europe by 2030.

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Volkswagen stock is rallying.

Meanwhile, the auto stock that has caught the markets’ attention is Volkswagen. The company has taken a leaf out of Tesla’s book and held its “Power Day,” which was similar to Tesla’s Battery Day. The event highlighted Volkswagen’s commitment to EVs where the battery can be a key competitive advantage.

Volkswagen has said that it expects to sell 450,000 EVs in 2021, which is more than double what it did in 2020. The company expects to become the largest EV maker globally by 2025. That’s a bold statement and it collaborates with the bullish view that UBS has of the company's EV plans.

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UBS on Volkswagen’s electric vehicle plans

UBS expects Volkswagen to match Tesla in 2022. It's forecasting that both of the companies would sell 1.2 million vehicles each. Volkswagen started delivering the ID.3 in Europe in 2020 and is now the biggest EV company in the continent.

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Volkswagen has started delivering ID.4 to U.S. customers. The model will compete with Tesla’s Model Y, which along with Model 3 accounts for most of Tesla’s sales. Tesla is facing increasing competition from legacy automakers who have launched a flurry of electric cars.

What Ford and GM need to do for VWAGY like returns.

Right now, Ford and GM aren't performing too bad at least in terms of 2021 price action. Ford is up over 42 percent, while GM is up 37 percent. Both of these stocks have outperformed the S&P 500 as well as the more hyped pure-play EV stocks like Tesla and NIO. However, VWAGY is taking the honors this year with a YTD gain of 103 percent.

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While all legacy automakers have committed billions towards EV plans, markets seem more interested in hard numbers on sales trajectories and battery plans. During the earnings call for the fourth quarter of 2020, analyst Rod Lache of Wolfe Research asked Ford about a hard number on its EV sales volume projections and battery costs. 

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Ford’s electric vehicle plans

Ford CEO Jim Farley said that the company would be able to provide more specifics by the spring, which would mean the earnings call for the first quarter of 2021. At that time, Ford would also consider making a decision on its dividend, which was suspended in 2020 amid the COVID-19 pandemic.

GM’s electric vehicle plans

GM has been a bit more open with its plans. According to the company, in the middle of this decade, it intends to sell over 1 million EVs in North America and China. However, even GM didn't provide the kind of granularity that Volkswagen provided.

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The U.S. and China are the two biggest markets for the company. GM operates with JV partners in China, which is the norm in the country. Only Tesla managed to get an exemption from the compulsory partnering with a local company and went solo in China.

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How Ford and GM could rise like VWAGY.

Ford and GM would need to provide more granularity than being “excited” (which was used multiple times in their earnings calls for the fourth quarter of 2020) about their EV and autonomous plans. Markets are looking at hard numbers to judge how these companies are placed in the EV industry.

We might get more details soon if Ford and GM might take a leaf out of Tesla’s and VWAGY’s book and provide more details about their roadmap towards a zero-emission future. If the roadmap pleases markets, as is the case with Volkswagen, Ford and GM could also surge.


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