The theory of disruptive innovation was described in a 1995 Harvard Business Review article. Often, companies fail to adapt to new technologies or changing market conditions. Blockbuster failed to revise an old DVD-by-mail video business model in response to a new streaming video strategy pioneered by Netflix. Today, many believe Tesla is disrupting a legacy automotive category while traditional automakers fail to respond sufficiently. For some automakers, this disruption may threaten their existence. Others, like General Motors, are dramatically accelerating their transition to a new industry future.
Imagine a company like GM, which reportedly makes seventy percent of its gross profits in North America from the sale of full-size pickup trucks and full-size SUVs, committing to ending the production of gasoline and diesel powered vehicles. That is exactly what GM announced last week. By 2035 GM will only sell zero-emission vehicles globally. This is a company confronting the realities of competitive disruption and a changing market environment in its industry. For GM, today’s commitment to zero-emissions began years ago. In 2013, just three years after the GM post-bankruptcy IPO, its former CEO (Dan Akerson) assigned an internal team to study Tesla to understand if the company could be a threat to the automaker’s business.
“[Akerson] thinks Tesla could be a big disrupter if we’re not careful.” - GM Vice Chairman Steve Girsky during a Bloomberg interview in 2013
Since then, General Motors has led all legacy automakers in electric and autonomous vehicle development, combined with establishing new business solutions that take advantage of world’s push toward electrification. Below are a few of the major GM technology investments and business development partnerships over the past several years helping to drive the company’s future.
Acquired autonomous driving technology company, Cruise, in 2016. Cruise is now a subsidiary of General Motors. The company has since raised outside investments for Cruise from investors like SoftBank, Microsoft, and Honda. Today Cruise is valued at $30 billion
Introduced the fully-electric Chevrolet Bolt in 2017, the first reasonably-priced EV sedan with greater than 200 miles of range (introduced before Tesla began selling Model 3). Since then, the company has announced plans to produce twenty new EVs globally by 2023 in addition to selling one-million EVs in China by 2025 (China might be the most important EV market in the world)
Revealed Cruise Origin last year. Origin is an all-electric vehicle designed to carry multiple passengers autonomously at highway speeds. Origin has no steering wheel or pedals, and is clearly designed for mobility solution businesses
In 2020, revealed a multi-vehicle modular propulsion system for electric vehicles powered by a new proprietary Ultium battery technology
Building a new battery factory to produce mass produce electric vehicle battery cells in a joint venture with the giant Korean battery supplier, LG Chem
Announced a new business in January (BrightDrop) that will electrify and improve the delivery of goods and services. The BrightDrop announcement included the introduction of an all-new EV commercial vehicle purpose-built for delivery businesses (the EV600). FedEx is already an early customer
Recently entered into a long-term strategic relationship with Microsoft to accelerate the commercialization of self-driving vehicles using cloud and edge computing technologies contained within the Microsoft technology stack
Tesla and Elon Musk deservedly get a lot of credit for driving the auto industry toward a future of electric vehicles and autonomous mobility solutions. However, unless you believe the future will be a winner-take-all ending, there are opportunities as an investor to profit from other companies poised to attack this global EV market as well. General Motors is one such company that will thrive during this future. The company’s recent accelerating valuation is poised to continue growing dramatically in the future as well.
I own shares of GM, Tesla, and Microsoft stocks mentioned in this article.
Disclaimer
TaaSMaster, LLC is not a registered investment advisor or broker/dealer. All investment opinions expressed by TaaSMaster, LLC are from personal research and experience of the owner of the site and are intended as educational material. Although best efforts are made to ensure that all information is accurate and up to date, occasionally unintended errors may occur.