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General Motors (GM), POSCO Unite for Battery Cathode Material

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·5 min read
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  • LCII
  • GT
  • GM
  • HOG

General Motors GM recently inked a non-binding agreement with South Korea-based POSCO Chemical to form a joint venture to construct a factory in North America.

Per the deal, the new facility will process Cathode Active Material (CAM) for the legacy auto biggie’s Ultium electric vehicle (EV) platform. CAM is a critical battery material that accounts for roughly 40% of the cost of a battery cell. The plant is scheduled to open in 2024 and is also expected to create hundreds of employment opportunities. The site of the facility is yet to be revealed.

Battery cells comprise four crucial components – cathodes, anodes, separators and electrolyte. The cathode is made by coating an aluminum foil with CAM, thus making CAM a key ingredient used for battery production, largely impacting the costs of EVs.

The alliance with POSCO will aid GM in building a sustainable and resilient supply chain for EVs encompassing the entire ecosystem from raw materials to battery cell manufacturing and recycling. Accelerating the production of batteries and their materials will help the automaker fortify its U.S. manufacturing foothold of Ultium batteries, bring down the cost of EVs and in turn, speed up the domestic adoption of EVs. Moreover, it will bolster its ability to make powerful, affordable and high mileage EVs. This venture will also help the auto giant drive innovation in battery performance, quality and efficiency.

POSCO is equally optimistic about this venture. Through this partnership, POSCO plans to bring innovation in battery materials and contribute to expedited adoption of EVs based on its superior product development, scaled-up production capacity and raw material competitiveness.

The new facility in North America will supply most of the CAM required by General Motors’ Ultium cell facilities under construction in Ohio and Tennessee and the two more U.S-based Ultium battery cell plants planned by mid-decade.

EV Push by GM

With the aggravating climate change concerns, investors are intrigued by automakers that provide green transportation solutions. Thus, automakers around the world are leaving no stone unturned to step up their EV game. Amid this intensified competition, General Motors’ big push toward EVs is commendable. The automaker has committed to invest $35 billion in EVs and autonomous vehicles by the end of 2025, marking a 75% jump from its initial $20-billion plan. The automaker also plans to introduce more than 30 EV models globally by 2025, with more than two-thirds available in the United States. The carmaker also aspires to achieve more than 1 million annual global EV sales by 2025.

At the heart of its EV strategy lies General Motors’ Ultium battery platform, which will power everything from mass market to high-performance vehicles. The company aims to bring first-generation Ultium cell costs 40% lower than those used in the Chevrolet Bolt EV and double the energy density at 60% lower cost in the second generation cells.

The company’s years of expertise and skill in electric drive system development are leveraging it to transit quickly from conventional vehicles to EVs. The Ultium Drive components will allow the company to ramp up EV production more quickly and adjust the production mix to cater to the rising market demand. Moreover, the company’s vertical integration in the EV space, incorporating both hardware and software, has helped take its EV game a notch higher, lending it a significant competitive advantage over peers. Ultimately, the auto biggie wants to boost EV revenues from about $10 billion in 2023 to approximately $90 billion annually by 2030.

General Motors currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Key Auto Companies to Tap On

A few better-ranked stocks in the auto space include Goodyear Tire GT, LCI Industries LCII and Harley-Davidson HOG, all of which flaunt a Zacks Rank of 1.

Goodyear has an expected earnings growth rate of 196.86% for the current year. The Zacks Consensus Estimate for its current-year earnings has been revised upward by 42 cents over the last 30 days.
 
Goodyear beat the Zacks Consensus Estimate for earnings in the last four quarters. GT has a trailing four-quarter earnings surprise of 228.45%, on average. Its shares have rallied 99.2% over the past year.

LCI Industries has an expected earnings growth rate of 67.95% for the current year. The Zacks Consensus Estimate for its current-year earnings has been revised upward by 45 cents over the last 30 days.
 
LCI Industries beat the Zacks Consensus Estimate for earnings in three of the last four quarters while missing once. LCII has a trailing four-quarter earnings surprise of 10.09%, on average. Its shares have rallied 20.6% over the past year.

Harley-Davidson has an expected earnings growth rate of 31.75% for the current quarter. The Zacks Consensus Estimate for its current-year earnings has been revised upward by 14 cents over the last 30 days.  

Harley-Davidson beat the Zacks Consensus Estimate for earnings in three of the last four quarters while missing once. HOG has a trailing four-quarter negative earnings surprise of 138.45%, on average. Its shares have dropped around 7.7% over the past year.


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