News Reporting

After market closed out for the week this Friday late afternoon, GM announced the addition of about 73000 Bolt EVs in the US and Canada from the 2019-2022 models. This is in addition to 69000 vehicles globally previously announced. This recall expansion is expected to cost the automaker an additional $1 billion, bringing the recall's total to 1.8 billion to replace potentially defective battery modules in the vehicles.

See more details from CNBC article here.

Our Take

We see shares of GM down about 2% after market, on light trading volume. This reaction is understandable. GM has been down roughly 30% since its 52-weak high in the 60s. This week has been particularly tough, with shares down 9% since the start of this week. This kind of news after a very rough 3 months acts a final trigger for investors to say "I'm done."

Now let's get 2 points straight:

1. This recall is with regards to the Bolt EV. However, Bolt EV is NOT the KEY PIPELINE for GM's secular growth. You should read about that secular growth pipeline for GM here, but just to give a brief summary: GM's path to all-electric future focuses on the Ultium batteries, the Cadillac and GMC Hummer, and EV charging across the country.

2.  Now GM trades below 8x earnings. As we've said before, this makes GM of today trades at the same multiple (or even lower) than that of GM before they made the transition towards electric vehicles. Does that make sense?

Bottom line, if this news force people out of GM with a loss, they deserve to take this loss because they don't know what they own. Bolt EV is NOT the KEY PIPEPLINE of GM. GM of today is cheaper than when it was a traditional, boring combustion engine manufacturer. This should be a buying opportunity. On Monday, the key buying moment would be if GM opens lower and reverses higher.