Is General Motors Company (NYSE:GM) Current Performance Likely To Last?

October 23, 2017, 11:39 am ET, BY Simon M.- Contributor| Editor: Thomas H. Kee Jr. (Follow on LinkedIn)

General Motors Company (NYSE:GM) has had its best year since August last year as evidenced by the fact that its stock price has outperformed that of its main competitor Ford Motor Company (NYSE:F) in the same period.

The company had its best August since 2004 in terms of deliveries this year, which indicates that the company’s current performance is excellent in comparison to its competitors.

The auto industry has been struggling since the great recession of 2008, but has since recovered in the past few years. This has been evidenced by the higher number of vehicles sold by automakers in the last few years.

The common phrase in the investment industry, which states that current performance is not an indicator of future performance, is especially true of the auto industry. Recent trends indicate that authorities are passing regulations to phase out fuel combustion vehicles in favor of electric vehicles.

The above trend means that companies such as Tesla Inc (NASDAQ:TSLA) are well positioned to benefit in the form of increased sales as more consumers choose to buy EVs instead of combustion engine vehicles. Traditional carmakers such as GM and Ford have to adapt to the changing trends in the auto industry to ensure their future survival.

Other headwinds facing GM include the declining demand for crossovers, which led to the company announcing lay-offs at its Spring Hill plant in efforts to lower overall capacity. The Spring Hill facility manufacturers some of GM’s most popular crossover SUVs, which reflects the fact that overall demand in the auto sector is slowing down.

Although GM currently faces stiff competition in the North American market from Ford and Fiat Chrysler Automobiles NV (NYSE:FCAU), all these automakers have to deal with the slowdown in the auto sector and the popularity of EVs.

GM stock price has rallied higher in the recent past despite the headwinds facing the company, which has led to some analysts warning investors for ignoring the headwinds facing the company.

The question remains whether GM shall maintain its impressive rally in the face of the numerous headwinds facing the company and whether it is a good long-term investment.

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