GM Needs to Walk the Tesla Talk

GM painted a wildly ambitious picture of growth at its much-anticipated 2021 investor conference. What investors really need from the company, though, isn’t more talk.

On Wednesday afternoon, the Detroit automotive giant kicked off its first big strategy event since the start of the pandemic by promising to double revenue and raise margins by 2030. These targets form the core of Chief Executive Mary Barra’s boldest bid yet to position GM as a growth-focused technology company rather than a mere manufacturer of light vehicles. As cars become the ultimate mobile devices, she wants to be the Apple of the automotive industry, a “platform innovator” with more than $80 billion in revenue from “new businesses” at the end of the decade.

The vision itself wasn’t hugely surprising— Ford, Volkswagen and Chrysler-owner Stellantis have all talked up new business opportunities in comparable investor days this year—but the numbers were. GM has made $138 billion of revenue annually in the past five years, on average. From that base, it expects roughly 5% annual growth from its traditional business of selling and financing light vehicles, including electric ones, and on top of that exponential growth in a range of complementary services that today mostly remain at the startup stage.

By far the most mature of these services is OnStar, which GM has built up over 25 years as a roadside-assistance service enabled by wireless technology. It probably accounts for the bulk of the $2 billion in high-margin revenue the company said it makes from subscriptions today. As onboard internet connections and operating systems move in line with the smartphone industry, GM expects that number to rise fast—to between $20 billion and $25 billion by 2030.

That bullish projection seems almost timid next to GM’s claims for Cruise, the San Francisco based autonomous-vehicle operation it bought in 2016. Dan Ammann, the former investment banker who has run the unit since 2019 and brought in Honda, SoftBank, Microsoft and Walmart as minority shareholders, is hoping for $50 billion in revenue by the end of the decade. Cruise is still perfecting the notoriously challenging technology required to offer driverless taxi rides safely to consumers, yet Mr. Ammann expects things to take off after 2023.

This is this kind of aspirational futurology that has earned Tesla a cultish following and outsize stock-market valuation. Which is the point: GM’s event was laced with implicit references to challenging the U.S. EV leader.

General Motors plans to phase out nearly all of its gas and diesel vehicles by 2035. Leading that transition is the first fully electric Cadillac. WSJ’s Mike Colias visited a GM testing site for a ride and an exclusive interview with GM’s President Mark L. Reuss. Photo Illustration: Alexander Hotz

Ms. Barra can’t be blamed for trying to capture as much of the auto-tech excitement as she can, but it remains easier to connect the dots between the present and the future at Elon Musk’s company. Whereas Tesla is already growing quickly thanks to popular EVs, GM has shrunk in recent years as part of a strategy of focusing on profits rather than revenues, and this summer it recalled all its Bolt EVs because of fire risks. More than big promises about a still-distant future, the company needs its next-generation flagship models, such as the Cadillac Lyriq due out next year, wowing consumers on the road.

The good news for investors is that none of GM’s growth hopes are baked into its stock, which fell with the wider market on Wednesday and still trades at a modest eight times forward earnings. If even a small portion of the company’s new business plans bear fruit in the coming years, shareholders could still get a lift.