General Motors GM has struck a deal with Lear Corp LEA, per which the latter will supply electrification technologies for the U.S. auto giant’s Ultium electric vehicle (EV) platform. The technologies that would be provided by Lear include battery disconnect units, intercell connect boards and wire harnesses. The financial terms of the deal have been under wraps.
With the EV revolution speeding up with each passing day, most automakers are shifting their gears to electric. General Motors’ big push toward EVs is commendable. In June 2021, the company boosted electric and driverless investment to $35 billion through 2025, up from $27 billion proposed in November 2020. General Motors plans to roll out 30 fresh EV models by 2025-end. Key launches, including the GMC Hummer EV, Cadillac Lyriq crossover EV, Equinox EV, Silverdo EV and Blazer EV, among others are expected to buoy top-line growth.
General Motors’ proprietary modular battery platform, Ultium Drive system, will aid in the transition to an all-electric portfolio down the road. Most of the EV models of the company will be powered by the in-house Ultium Drive platform, which will not only boost General Motors’ manufacturing efficiencies but will also enhance the performance and the range of its future vehicles. The Ultium battery is being utilized in the GMC HUMMER EV and will also be deployed in the Silverado EV and other electric models. With Ultium Drive playing a pivotal role in GM’s EV ambitions, the latest agreement with Lear for the supply of e-mobility technologies for its hardware platform bodes well.
As for Lear, this is a major business win for the company. Lear’s CEO Ray Scott believes that the company’s unique electrification engineering knowledge and molding and precision stamping capabilities, along with strategically located manufacturing facilities, enabled it to secure this contract from General Motors. In fact, Lear claims it to be the largest award to date for its Connection Systems business.The firm’s Connection Systems Business is on track to grow to around $600 million in 2022 and approximately $1 billion by 2025. The company’s in-house capabilities to develop cutting-edge technologies position Lear well to win many such contracts, going forward.
Zacks Rank & Key Picks
General Motors and Lear currently carry a Zacks Rank #3 (Hold) each. A couple of better-ranked players in the auto space include Tesla TSLA and BorgWarner BWA, both of which carry a Zacks Rank #2 (Buy).
Tesla is the market leader in battery-powered electric car sales in the United States, with roughly 70% market share. Robust demand for Models 3 and Y is buoying Tesla’s revenues. High volumes are also aiding Tesla in achieving production efficiencies, thereby strengthening gross margins. The Zacks Consensus Estimate for Tesla’s 2022 sales and EPS implies year-over-year growth of 58% and 77%, respectively. The consensus mark for 2023 sales and EPS suggests a year-over-year increase of 41% and 30%, respectively.
Automotive equipment provider BorgWarner is a global leader in clean and efficient technology solutions required for combustion, hybrid and electric vehicles.The buyout of Delphi Technologies, which closed in October 2020, has strengthened BorgWarner’s electric propulsion leadership, with expanded capabilities and scale.The company’s Charging Forward project, along with strategic acquisitions, are set to fuel the firm’s prospects. The Zacks Consensus Estimate for Tesla’s 2022 sales and EPS implies year-over-year growth of 6.3% and 3%, respectively. The consensus mark for 2023 sales and EPS suggests a year-over-year increase of 9% and 18%, respectively.
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