Honda and GM partner for environmental gains

The trend in US vehicle stocks is generally down, with well-known brands such as Ford, Tesla and Toyota in the red over the short and medium term. But there are two popular brands for whom everything seems to be going right – Honda (HMC) and General Motors (GM), who both reported positive returns over one- and three-month periods.

The two companies have announced plans to join forces in co-developing a series of affordable electric vehicles based on a new global architecture using next-generation Ultium battery technology. The first of these vehicles is set to roll off the production line in 2027.

“GM and Honda will share our best technology, design and manufacturing strategies to deliver affordable and desirable EVs on a global scale, including our key markets in North America, South America and China,” said Mary Barra, GM chair and CEO. “This is a key step to deliver on our commitment to achieve carbon neutrality in our global products and operations by 2040 and eliminate tailpipe emissions from light-duty vehicles in the U.S. by 2035. By working together, we’ll put people all over the world into EVs faster than either company could achieve on its own.”

“Honda is committed to reaching our goal of carbon neutrality on a global basis by 2050, which requires driving down the cost of electric vehicles to make EV ownership possible for the greatest number of customers,” said Toshihiro Mibe, Honda president & CEO. “Honda and GM will build on our successful technology collaboration to help achieve a dramatic expansion in the sales of electric vehicles.”

Here's a look at the two companies’ fundamentals:

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Honda Motor Co. Ltd

Honda Motor Co. Ltd. is a Japanese public multinational conglomerate manufacturer of automobiles, motorcycles, and power equipment, headquartered in Tokyo, Japan. The company claims to have vehicles running on all seven continents – even Antarctica!

Honda in the US has a market cap of $44.967 billion, a PE ratio of 9.84 and EPS of 2.66. Dividends are paid semi-annually, in March and September, with a dividend yield of 3.15%. The last dividend, on 30 March 2022, paid $0.45 per share.

A reported 37.7% drop in total sales in August 2022 caused a slight reduction in the share price at the beginning of September. However, the stock held its ground on the back of the news that the automaker has signed a deal with Hanwa Co to secure a stable supply of metals such as nickel, cobalt and lithium for the batteries used in electric vehicles. This is in line with its promise to cut 50% of CO2 emissions from its products by 2050, relative to 2000 levels.

Imagine you bought one share of Tesla well before its split, for $300. After the split, that share became three shares, and your purchase price changed to $100 per new share. If you needed to raise $400 to cover an expense, you could sell two of your shares for $270 each, receive $540 for the sale, and owe taxes on your gain of $340 ($170 of gain per share, times two shares). You would still hold on to your remaining share.

If the split never happened, yet you needed to sell your investment to raise money, you would be selling your one share for $800. You would then owe taxes on your gain of $500 from your original purchase price. That’s a higher tax cost, simply because you couldn’t break apart your investment into a smaller piece.

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General Motors

The General Motors Company is an American multinational automotive manufacturing company headquartered in Detroit, Michigan, United States. It is the largest automaker in the United States and was the largest in the world for 77 years, until losing the top spot to Toyota in 2008, according to Wikipedia.

GM’s share price has been flagging this year, but there are signs that the tides could be turning. The stock price recently breached the $40 mark after a low of $30.33 this year. However, it is still short of its 52-week high of $67.21.

The company is on a mission to beef up its electric vehicle offering and recently announced it will be reinstating its quarterly dividend. The dividend was suspended April 2020 in response to uncertainty driven by the global coronavirus pandemic.

GM has promised a quarterly dividend of $0.09 ($0.36 annually), yielding just under 1%.

The company also announced a share buyback, indicating its intention to repurchase up to $5 billion in shares.

“GM is investing more than $35 billion through 2025 to advance our growth plan, including rapidly expanding our electric vehicle portfolio and creating a domestic battery manufacturing infrastructure,” said Mary Barra, GM Chair and CEO. “Progress on these key strategic initiatives has improved our visibility and strengthened confidence in our capacity to fund growth while also returning capital to shareholders.

Conclusion

It’s encouraging to see these two competitive brands, Honda and General Motors, coming together to pool their resources in the pursuit of a cleaner environment. This partnership is surely worthy of increased investment in both companies.

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Sources – General Motors, Honda Motor Co. Ltd