Thu. Jun 30th, 2022

It may be easier for a manufacturer than an oil company to reinvent their business. On Monday, the new investment fund, car no. 1, announced that its latest interest is in General Motors. Earlier this year, the investor in San Francisco sent shock waves through U.S. businesses by winning a proxy match at Exxon.

Engine no. 1 had only a chunk of the $ 50 million resources. But his thoughtful critique of how a incumbent failed to use a decarbonization strategy helped him win the support of the world’s largest money managers. They replaced three board members.

In contrast, GM has been preparing for the electrification of the automotive industry for years. Recently, the carmaker announced that it will stop manufacturing internal combustion vehicles by 2035. Engine no. 1 does not conduct an activist campaign at the Detroit enterprise.

Rather, it endorsed GM’s position that current carmakers would be crucial in EVs and that Wall Street would eventually come on board as well. That makes perfect sense.

Currently, there are only a few million electric cars among the approximately 100 million passenger vehicles sold annually. And yet Tesla, the EV leader, has a market capitalization of nearly $ 800 billion. It has many competing manufacturers that are only electric, but they are further behind and some have not sold any vehicles. Among the contenders is truck manufacturer Rivian, which is expected to list its shares at a value of $ 80 billion.

Engine no. 1 says there will be no champion with a winner-in-EV car, unlike some US digital subsectors. Rather, the automotive industry has largely consolidated into a handful of old players who have the necessary resources and expertise to switch to EV development.

GM shares are almost no longer beaten. In the last five years, they have risen by 69% – below the S&P 500, but almost four times better than Ford. GM’s enterprise value is $ 100 billion, a figure that according to engine no. 1 is dwarfed by its potential value as an EV manufacturer. The impimatur of the fund may be the ratification needed to bring other fund managers behind GM together.

The Lex team is interested in hearing more from readers. Please tell us what you think of GM’s prospects in the comments section below.

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