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GM plans investments to expand electric vehicle production

Yahoo Finance’s Alexis Christoforous, Brian Sozzi, and Rick Newman discuss General Motors’ plans to announce a third production plant in an effort to ramp up EV production.

Video Transcript

ALEXIS CHRISTOFORUS: It looks like GM is making some major investments. The automaker is expected to announce its planned expansion, a move that will make a former Saturn plant in Tennessee a third factory for GM's electric vehicle production. Yahoo Finance's Rick Newman here to discuss this one. So hey, Rick, what can we expect from this third plant? I guess GM is going to be making that announcement anytime now.

RICK NEWMAN: Yeah, that announcement, officially, will come around 11:00 AM today. Bloomberg has some of the details. They're saying that GM is going to start building a new Cadillac electric vehicle at the factory in Spring Hill, Tennessee. That's where Saturn used to be based. Of course, GM closed down Saturn back during its bankruptcy in 2009.

But this would mean GM now has three separate plants where they're going to be making electric vehicles. That's a lot. And what that tells you is GM is not just talking the talk here. They're actually making the investments and they're taking the risk that comes with the belief that electric cars are the future of transportation. So this means a lot of new competition coming for Tesla and all of the other automakers that are rolling out electrics.

BRIAN SOZZI: Well, exactly, Rick. What does this mean for Tesla? It's not like GM's putting out electrified golf carts here. These are legitimate cars that have impressive ranges and can really boogie.

RICK NEWMAN: Yeah, so what's happening is GM and other automakers, they're catching up to Tesla. I mean, electric cars are the only thing Tesla does. So they are-- I mean, they are the market leader because that's the one thing they do. GM, obviously, still sells a lot of gasoline-powered pickups and SUVs. But they are hot on Tesla's tail.

And another thing I should throw in there is tonight GM is going to show the first details of the new Hummer electric SUV, and then we're going to get more on that tomorrow. So I think we're going to be talking about that tomorrow morning. This is going to be a big-- I mean, Tesla doesn't have anything like a Hummer electric vehicle. Nobody really does.

So GM is getting into the act here, and it means that-- two things, I think. A lot more people are going to be interested in SUVs-- they're going to expand the market-- and Tesla just has more competition.

ALEXIS CHRISTOFORUS: Hey, have you heard anything new on GM and Nikola? Because we know that GM is making this big investment in Nikola's Badger truck. But the company, its founder, coming under a lot of pressure here. The stock has really pulled back. And there's talk that maybe Nikola abandons the Badger if GM pulls out of the deal.

RICK NEWMAN: Yeah, GM-- so GM made that deal with Nikola before that research came out from Hindenburg Research, saying they allege that Nikola's technology is kind of a fraud, and of course, the CEO of Nikola actually left the company after that. GM has stuck by that deal, but I'm not sure that deal is all that risky for GM. Because even though GM would be investing in Nikola, Nikola, if it actually produces these vehicles, would be paying General Motors for help with production.

So this will be kind of-- GM is investing in the company, but the company would be a customer of GM, also. So I've seen some analysts that say this is a pretty low-risk deal for GM. Even if Nikola were to go south, GM really wouldn't lose all that much. So I think there's a lot of upside for GM. They could still walk away from that deal, but Mary Barra, the CEO, has said, we know what we're doing. We know how to vet a deal. And so far, they're sticking with Nikola.

BRIAN SOZZI: Rick, I do want to go back to Tesla real quick. Earnings out this week. Is there anything Tesla could do that would impress Wall Street? This stock has gone through the roof in the past three months.

RICK NEWMAN: I guess. What-- they-- let's remember, the S&P declined to put Tesla in the 500 Index in which it technically qualified for. And I think the reason S&P did not do that is it just was not satisfied with the stability of their earnings. So I think what Tesla could do to satisfy investors is just, over time, show more stable numbers.

And I'm not an expert on the accounting, but fewer things with asterisks and unusual accounting that suggests maybe they're drawing sales into a prior period or a later period or things like that. If they can just stabilize-- I mean, they have actually stabilized production. If they can stabilize their earnings numbers, I think that is kind of the best case for Tesla.