The auto {industry} goes by means of a stage of disruption not seen in almost 100 years. However that disruption is gradual and can take time to completely shake out. What we all know proper now could be that electrical car (EV) manufacturing and demand are rising and the marketplace for gasoline-powered vans and SUVs is booming. 

One firm that is primed to learn from each the short-term and long-term traits is Normal Motors (GM 0.03%). And the corporate is perhaps higher positioned than you assume. 

Picture supply: GM.

The core is powerful

Outdoors of some manufacturers — like Tesla (TSLA -1.55%) — the auto market remains to be very undersupplied in 2023. The Chevy and GMC manufacturers of vans and SUVs are nonetheless in extraordinarily excessive demand, and the corporate has low stock, regardless of rising manufacturing to close or above pre-pandemic ranges. These are high-margin automobiles that maintain income coming in for GM. And the income are extraordinarily excessive, as you may see under. 

GM internet earnings (TTM) information by YCharts. TTM = trailing 12 months.

GM has a $47 billion market cap, so the online earnings and money movement numbers you see above make this simply a worth inventory. And whereas administration thinks outcomes will decelerate barely in 2023, they nonetheless count on internet earnings of $8.7 billion to $10.1 billion. This can be a nice inventory even with out progress, however there are additionally some large investments forward for GM. 

The long run seems brilliant

GM is specializing in increasing EV manufacturing internally and advancing autonomous driving by means of its subsidiary Cruise, of which GM owns about 80%. On the EV entrance, GM has secured the uncooked materials to construct 1 million EVs yearly by 2025. And by that 12 months, it expects to have a revenue margin on the premise of earnings earlier than curiosity, taxes, depreciation, and amortization (EBITDA) within the low to mid single digits. 

The extra thrilling progress alternative might be in autonomous automobiles, the place GM’s majority possession of Cruise is offering an industry-leading place. Cruise has fully-autonomous industrial operations in three cities within the U.S. with extra anticipated this 12 months.

And the Cruise Origin autonomous ride-sharing car is anticipated to launch later this 12 months. Automobiles just like the Origin must be decrease price than Uber (UBER -0.29%) or Lyft (LYFT 4.48%), which mixed have over $35 billion in annual income, which we are able to use as a proxy for market dimension as we speak. 

UBER income (TTM) information by YCharts.

I believe between EVs and autonomous automobiles, the longer term is brilliant for GM. 

Worth with a splash of progress

GM trades for under 5 occasions the midpoint of 2023 earnings steerage and has a rising variety of EVs and a number one place in autonomous automobiles. You may really feel that Tesla is a frontrunner within the auto {industry} as we speak, however GM is healthier positioned than most traders assume. 

I believe the transition to EVs will take rather a lot longer than folks imagine, and vans and SUVs will nonetheless be a giant, worthwhile enterprise even a decade from now. GM could have a money movement core to construct an EV enterprise on and have time for Cruise to develop. Given the mixture of worth and progress potential, that is the one auto inventory I’d purchase as we speak.