General Motors (GM) has set sights on producing more than 9.8 million vehicles in 2016 and exceeding the record it set in 2015. From the fundamental baseline, GM is strong and growing stronger. Its core business dynamics are excellent. The price to earnings ratio is a reasonable 5.25, and experts have rated the stock as a buy for 2016. In addition, we believe the stock merits a deeper look for TM readers.
The Core and Risks
GM’s core business is building vehicles for public transit, commercial uses, and private automobile ownership. Threats to GM’s future do come from alternatives to car ownership as ride share technologies like Uber gain traction. Another market development to watch is autonomous driver technology, which could result in cars delivered to a customer’s door for temporary usage. GM addresses these issues head-on below.
The China Factor
GM has a bold plan for China, which holds vast potential for sales and luxury car ownership. The company plans to roll out as many as 60 new models before 2020 and bring all of its major brands fully into the China markets. GM will spend a lot of development resources on technology that connects the vehicle to the Internet and other systems. They will also develop products aimed at the unique and crowded conditions of China’s roads, such as collision avoidance and autonomous operation features. Foremost, the company will add Green vehicles to combat the growing concern in China about automobiles and air pollution.
Pollution As An Added Driver
In China, vehicles contribute to massive air pollution in large cities, including the capital region. The situation has caused closures for health hazards. In a new anti-pollution business environment, GM’s work with electric and hybrid vehicles could continue to reap competitive benefits. The Chinese government offers exceptional incentives for the purchase of electric and other non-polluting vehicles.
