GM should spin off its electric unit to capture some of that Tesla market mojo, Deutsche Bank says

Published Fri, Aug 14 202010:18 AM EDT

(This story is for CNBC Pro subscribers only.) Deutsche Bank thinks GM is missing out on the electric vehicle stock market hype. The Wall Street firm — which has a buy rating and $33 per share price target on General Motors — said in order to unlock value in the budding industry, like Tesla and Nikola , General Motors should break-off its electric vehicle business into its own publicly traded company. "GM should spin off its electric vehicle operations and capabilities into a stand-alone company which could force the market to recognize its robust EV technology and upcoming lineup," Deutsche Bank research analyst Emmanuel Rosner told clients. Despite having strong electric vehicle capabilities, shares of General Motors are down about 25% in 2020, while its electric vehicle competitors, Tesla and Nikola, have rallied nearly 290% and more than 350%, respectively. Investors have piled into the electric automakers this year, betting on the industry's growth prospects and the future of electric cars. Nikola, which has yet to produce a vehicle for customers, has attracted significant investor interest since going public on June 4 through a reverse merger with special acquisition company. Electric automaker NIO has also rallied more than 200% this year. "Tesla's surging market cap and the large valuations fetched by new EV plays reaching capital markets seemingly every day, stand in sharp contrast with depressed legacy automakers' value," added Rosner. Last week, General Motors launched a "technology spreadhead" vehicle that it expects will rival, if not outperform, anything else on the market today, including Tesla , the global leader in electric vehicle sales. The new vehicle, the Cadillac Lyriq crossover, "marks a turning point for the brand, a pivot point for the brand, an opportunity to regain momentum," said Cadillac President Steve Carlisle. Tesla's market cap has ballooned to more than $300 billion. "We estimate a GM EV stand-alone entity could fetch a minimum $15-20bn valuation, with upside potential up to $100bn, depending on the market reception to its product/technology," said Rosner. Rosner said if General Motors spun off its electric vehicle unit, it would unlock shareholder value, give the new entity large access to cheap capital to fund expected growth, and attract and attain-high caliber talent. "Nothing is off the table," General Motors CEO Mary Barra said, when asked on the company's earnings call earlier this month if the automaker would ever consider the spin-off. "We are open to looking at and evaluate anything that we think is going to drive long-term shareholder value," Barra added. — with reporting from CNBC's Michael Bloom.

A General Motors Co. Chevrolet Volt electric vehicle on display at the Seoul Motor Show in Goyang, South Korea, on Thursday, March 28, 2019.

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(This story is for CNBC Pro subscribers only.)

Deutsche Bank thinks GM is missing out on the electric vehicle stock market hype.

The Wall Street firm — which has a buy rating and $33 per share price target on General Motors — said in order to unlock value in the budding industry, like Tesla and Nikola, General Motors should break-off its electric vehicle business into its own publicly traded company.