Has GM Quietly Taken The Lead In Autonomous Vehicles?

Traditional automakers have been dismissed as stragglers on the trail toward autonomy. General Motors Company GM, skeptics said, could crumble under the “innovator’s dilemma” and cede to the likes of Tesla Inc TSLA.

But things are starting to look up for the time-tested manufacturers. In fact, Deutsche Bank now sees GM deploying fully autonomous vehicles “potentially years ahead of competitors” with a rollout in the next six quarters.

“We now believe that GM may be at the head of the pack,” analysts Rod Lache, Shreyas Patil and Mike Levin wrote in a Monday note.

Racing To Ride Share

Last week, in a report leading to four-year intra-day highs, GM announced that it developed the “first mass producible self-driving car” with the capacity to produce 100,000 per year.

“We believe that businesses built off of this platform will ramp much faster than is widely expected,” Lache, Patil and Levin wrote (see Lache's track record here). “A fast ramp could perpetuate sustainable advantages. And we believe that this will be material, even to a company of GM’s size.”

A speedy deployment of self-driving fleets could help GM establish “natural monopolies” in major metropolitan areas, where 60 percent of households are soon expected to choose autonomous ride sharing over vehicle ownership, according to Deutsche Bank estimates.

“[The] potential valuation of GM’s burgeoning Mobility business is too big to ignore, particularly if GM sees the merits of spinning it off … and we believe that they will,” the analysts wrote, appraising GM’s Maven segment around $30 billion.

What To Make Of It

Deutsche Bank upgraded GM to a Buy rating and increased its price target from $36 to $51. At the same time, the firm lowered its 2018 earnings-per-share estimates from $6.17 to $5.79, primarily driven by a scaleback in North American production ahead of product launches.

GM was trading at $40.57 at the time of publication.

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