Chinese automakers’ rapid rise has forced global rivals to rethink their strategies. One example is the alliance between General Motors GM and Hyundai Motor, which centers on co-developing new vehicles. The two auto giants are now set to co-develop five vehicles to save costs while ensuring quality. As low-priced Chinese automakers continue to disrupt the markets, this effort is aimed at battling growing costs from trade wars while capturing market share.
Through this deal, General Motors will gain access to leading hybrid technology, while Hyundai will benefit by entering into new segments such as vans in North America and mid-sized pickups.
The companies expect to produce at least 800,000 vehicles annually as part of this collaboration. Four of the models- including a compact SUV/car/ pickup, and a mid-size pickup with the flexibility to use either internal combustion or hybrid propulsion systems- will target Central and South America. The fifth, an electric commercial van, is designed for the North American market. Production of all five vehicles is expected to begin in 2028 as full-fledged design and engineering work is underway.
GM will bring its expertise in mid-size truck development to the table, as Hyundai will focus on the compact vehicle and electric van development.
Together, they will work towards keeping a stronghold on the Detroit area to prevent Chinese automakers from competing with its high-tech, low-cost models. Chinese producers’ low-cost models had already pressed margins of legacy automakers in the United States; added to that came the burden of tariffs. Although the place of production has not been disclosed, any import from South Korea would imply a 15% tariff.
GM and Hyundai are not alone in turning to South Korea for an edge.
Tesla (TSLA), the pioneer in EV technology, also signed deals with South Korean companies such as Samsung Electronics and LG Energy Solution. Samsung will give Tesla access to advanced semiconductors that are crucial for self-driving systems and improve overall EV performance. This will safeguard Tesla from global chip shortages. LG will add diversification to Tesla’s dependence on Panasonic and its in-house 4680 cells for batteries- the biggest cost driver for EVs.
Whether alliances like GM-Hyundai can truly blunt China’s dominance remains to be seen, but they underscore a global shift: legacy players are leaning on partnerships to stay competitive in a rapidly changing auto market.
The Zacks Rundown for General Motors
Shares of GM have gained around 10.2% year to date against the industry’s decline of 13.7%. Its peers, Tesla and Ford F, have lost 13.7% and gained 25.8%, respectively, over the same period.
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From a valuation standpoint, GM trades at a forward price-to-sales ratio of 0.31, below the industry average. It carries a Value Score of A. In comparison, Tesla and Ford trade at 10.58 and 0.29. Tesla and Ford have a Value score of D and A, respectively.
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Take a look at how General Motors’ EPS estimates have been revised over the past 30 days.
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GM currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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This article originally published on Zacks Investment Research (zacks.com).