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Should $GM and $F spin-off their electric vehicle business segments?
On February 18, 2022, $F shares surged as CEO Jim Farley was looking at the benefits and risks of spinning-off their Ford's vehicle business.

Unlike Ford, $GM chose not to cater Wall St.'s demands in spinning off their electric vehicle business.

Investors want these automakers to spin off their electric vehicle businesses because they believe that it will unlock value. Auto executives are hesitant to spin off their electric vehicle business for two reasons:
  1. their electric vehicle business is young and still relies on the resources of their parent company to survive and build a foundation
  2. if ever electric vehicles do go mainstream, then shareholders of the ICE-vehicle business could essentially see their stake go to zero

Regarding the second point, the advantage that the ICE-vehicle business would have is that they have the infrastructure to make any vehicle that has many moving parts. Even if cars of the future could stop running on gas, they can run on other fuels like hydrogen. And regarding hydrogen vehicles, they still have many moving parts.

Back in 2018, Hyundai saw the move to hydrogen-powered vehicles as a way to preserve many jobs in the automotive supply chain. Since a fuel cell engine closely resembles petrol engines, there wouldn't be many changes to the automotive supply chain if the industry moves towards producing hydrogen vehicles. Until refilling infrastructure ramps up, consumers are going to continue to remain hesitant in adopting a hydrogen-powered vehicle.

With everything, the debate on whether these big automakers should spin off their electric vehicle business segments is still difficult. The surge in interest rates and concerns over the supply of rare earth metals and other metals essential to electric vehicle production is making investors hesitant in investing in electric vehicle stocks. At the same time, these brands come with high notoriety, and with that, they'll have an easier time selling vehicles to consumers. They're not young brands like $RIVN and $LCID, who've been covered negatively by the press over their issues with production. At least with the Big Automakers, their relationships are more established, they hold more influence in the overall automotive supply chain, and the people working there have a lot more experience with the issues that the industry is currently dealing with compared to those working in the startups.

Me personally, I think that Ford's electric vehicle business is more established and thus, I think they should consider a spin off. As for GM, their electric vehicle business is less established as the company is currently transitioning away from producing the Bolt and ramping up production for the Hummer EV and the Cadillac Lyriq.
www.ft.com
Hyundai says hydrogen cars will help protect jobs
South Korean carmaker teams up with Audi to collaborate on technology

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