Is General Motors (GM) Stock a Buy in April?

General Motors (NYSE: GM) stock price is down nearly 30% year-to-end as the carmaker continues to grapple with the shortage of key components including semiconductor chips. General Motors owns and operates popular global automobile brands including Buick, Cadillac, GMC, Hummer and Chevrolet. 

GM’s Falling Sales

General Motors reported a more than 20% slump in U.S. deliveries, sending the automaker’s shares tumbling on the first day of April. GM’s U.S. deliveries declined 20.1% to 512,846 in the first fiscal quarter after Buick deliveries plummeted by more than 58% to 19,146 during the period. 

Deliveries of Cadillac were down 24.3% at 28,216 in Q1, while Chevrolet deliveries plunged 19.6% to 344,033. GMC deliveries in the first quarter tumbled 7.5% to 121,437. 

GM said it expects inventory to stay “relatively low throughout the year due to high demand.”

“Supply chain disruptions are not fully behind us, but we expect to continue outperforming 2021 production levels, especially in the second half of the year.”

 

“GM estimates total light-vehicle SAAR for the first quarter was 14.1 million, down from 16.8 million a year ago, due to lower inventory and production levels,” the company said in a trading update.

The automaker said the production of its Chevrolet Bolt EV and Bolt EUV models is set to continue on April 4, while the production of its Cadillac LYRIQ started on March 21.

The Global Chip Shortage

A drop in Q1 sales comes as supply chain-related issues continue to weigh on the company’s production and dealers’ inventories. The decline was in line with the analysts’ expectations.

However, Steve Carlisle, president of GM’s business in North America, said chip supplies are now improving, adding he anticipates GM will report year-over-year sales growth by the end of the second half of 2022. 

The company’s factories were operating almost at normal levels in the first quarter, Carlisle said. 

GM was the second top-selling carmaker in the U.S. in 2021, behind Toyota. GM delivered 512,846 vehicles in Q1, while the Japanese car manufacturer delivered 514,492 vehicles, down 14.7% from the year-ago period. 

GM has been focused on rebuilding dealer inventories after the global chip crunch battered the car industry following the coronavirus pandemic. The U.S. automaker said it boosted its production in North America in Q4 2021 and Q1 202, helped by the increase in chip supplies. 

The company reported it had roughly 274,000 in its U.S. inventory as of March-end, including units that were in transit to dealers, compared to 200,000 at the end of 2021 and 129,000 at the end of September. 

GM also announced it will halt production at its Lansing Grand River plant where it makes Cadillac CT4, Cadillac CT5, and Chevrolet Camaro models, citing a temporary part shortage. 

The move comes a week after the carmaker suspended production at its Fort Wayne plant for two weeks due to a chip shortage. 

New Business Unit

In March, GM said it plans to create a new organization to unlock new revenue opportunities as the company increases its focus on electric vehicles. The new business unit will be led by Steve Hill, who has served as Vice President of Chevrolet since 2019. 

Named “Commercial Growth Strategies and Operations”, the new organization will manage GM Fleet, U.S. Sales Operations, and EV Retail Innovation teams. 

“The Commercial Growth Strategies and Operations organization is well-positioned with this leadership team to drive continued growth and profitability for our dealers and GM while stewarding our transition to an all-electric future,” said Carlisle.

The primary focus of the group is to drive vehicle sales, help improve GM’s brands and reinforce the carmaker’s market position. The organization will also be responsible for identifying and unlocking any new growth opportunities, explained GM spokesman Sabin Blake. 

Chevrolet rolled out multiple important vehicles under Hill’s command, including the Corvette C8 and Bolt EUV. Chevrolet also announced plans to launch the first all-electric pickup truck – the  2024 Silverado EV – expected to hit the markets in the fall of 2023. 

On the other hand, Hill was also the one to recall the 2017-22 Bolt EVs and EUVs due to a potential fire risk. The recall included 140,000 Bolt vehicles, while the Orion Assembly Plant, which manufactures Bolt EVs, is currently idle so that GM can focus on fixing the defective batteries that were the main reason behind the recall. The plant is set to resume production on April 4. 

Conclusion

Investors are likely to continue staying away from GM shares as the company struggles to come on top of the challenging supply chain situation. The GM stock is down 30% YTD as investors are concerned that rapid investments in the pivot to EVs will continue to weigh on profits and margins.

Traders looking to get exposure to red-hot EV stocks are likely to prefer Tesla given the company’s track record of successfully navigating supply chain issues. The market-neutral stance may last until GM can prove its production output is improving.

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