GM’s ICE Business Is Worthless, Adam Jonas Confirms

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Wow, how things change. Ten months ago, I wrote an article after Morgan Stanley’s Adam Jonas declared to investors that he felt that GM’s EV business was worth $100 billion, while offering an opinion that the business should be valued at $60 billion. Let’s revisit my original article briefly, and then look at his recent interview.

Is GM’s ICE Business Worthless?

If you’d like to see my original article, it’s here. In that article, I was confused — and still am — how he came to his conclusions. He valued GM’s EV business as a $100 billion business, while simultaneously suggesting a share price of $43 per share, which would have pegged GM’s market cap right around $60 billion. At the same time — and you must remember my article was written pre-stock split if you’re reading it — he valued Tesla with a share price that would put the market cap around $120 billion, or just a $20 billion premium over GM.

That didn’t make sense to me then and still doesn’t make sense now. Using the EV production capacity that GM had announced at the time, I broke down Jonas’ call to be $333,333 per unit of EV capacity … in 2026. If I applied the $333,333 per unit of EV capacity as a metric, assuming that Tesla would only manage to produce 1 million EVs in 2026 (spoiler: Tesla will produce 1 million EVs … in 2021), then using just Jonas’ capacity metrics, Jonas should have felt Tesla was worth $333 billion if he felt that GM was worth $100 billion.

And again, this was assuming that Tesla has absolutely no longstanding advantages over GM. In other words, the only way I could get these two numbers was by ignoring Tesla’s battery business, solar business, Supercharger network, lack of a dealer network, engineering leads, and Full Self Driving data methods, or considering them worthless. Otherwise, how can you justify that GM — a company that is really good at making press releases pretending it is doing the right thing while never really proving it — had an EV division nearly as valuable as Tesla?

It’s also worth mentioning that since Jonas’ 2019 call, I have really put a huge grain of salt on his opinions. If you forgot, in May of 2019, Jonas made big news by putting out a bear case on Tesla that showed it falling to $10, while also stating (but not getting financial media coverage) a bull case of $391, a 39.1× difference in his price target. Within a year.

Now, I explained in my article last year that I do not make specific price targets, instead looking at a list of key indicators and if I find that I believe in them, the stock price takes care of itself. But I’ll gladly point out how Jonas did with his $10–$391 a share call. Exactly one year later, Tesla was valued at $826.70 a share (remember: pre-split!), meaning even with the huge window that Jonas gave himself, he still managed to miss the price by a huge margin. (Editor’s note: Almost every single Wall Street analyst vastly underestimated Tesla’s stock price growth at that point. Though, that doesn’t mean the point isn’t a good one. —Zach)

(Also worth pointing out, I mockingly said that if I gave myself 39.1× windows, I could probably do an okay job predicting stock price, so I said by June 20, 2021, I expected Tesla to fall between $200 and $7,820 per share. Split adjusted, I need the stock to be between $40 and $1,564 per share, which appears to be on track right now. Get me my professional analyst job!)

Anyway, the last thing that I want to mention is that I remain extremely skeptical that GM or any “legacy” automaker will successfully make the transition. GM puts out a lot of nice press releases. As far as I’m concerned, that’s almost all it does. Sorry, GM, I’m not going to be impressed with flash, I’m going to look behind the scenes and … I continue to not see much there.

So … GM’s ICE Business is Worthless

Before going on, it’s worth pointing out that I actually respect Jonas as a stock analyst. Although I don’t agree with … well … nearly anything he’s said before, he’s willing to change his views based on new information, unlike other analysts that keep spouting the same drivel no matter what. In fact, in September of 2020, Jonas specifically said that Tesla is a story that retail got right and analysts got wrong. I appreciate that sort of reflection, so while it may sound like I’m picking on him with the previous articles and above information, I will in the next breath defend him as working within the traditional analyst role that forces you to create calls like that.

Add to that that I feel like the Tesla story was there for anyone who was willing to dig, and that retail was just willing to dig more than traditional analysts. Jonas makes a lot of pretty good calls — his call for GM being worth $43 a share last June appeared to many as a reach at the time when the shares were at $24.46, but with the stock currently at $60.16 per share, it seems like he was one of the people who recognized that potential. His call on Tesla, however, was for $650 per share … pre-split, meaning that Tesla’s valuation is roughly 5× above what he felt it would be. (Editor’s note: I would also add that I think Jonas was the first to bring up on a quarterly conference call the potential of Tesla introducing a Lyft/Uber-like service using its robotaxis, and eventually got Elon Musk to admit that they were thinking along those lines but the idea was only half-baked at the time. That said, he’s also put some truly wild and laughable ideas out there on those calls, something that has left many followers scratching their heads and wondering if Jonas was QUI — questioning under the influence. —Zach)

Anyway, with that as our backdrop, it seems that Jonas is finally picking up on the same trends I and many others who have been analyzing Tesla for the past few years have been saying. He was interviewed by Bloomberg recently, and it was apparently shocking … shocking, because he is coming around to the way that a lot of us have been talking about Tesla. The full interview may be found on YouTube here. I’m going to just focus on some highlights.

The first is this: after being asked about his declaration that not owning Tesla stock could be risky, the anchor asked him to be clear about what his suggestion was regarding Tesla and other EV companies. Jonas replied:

“Due to the fact that Tesla has zero internal combustion entanglement, and is in a position during an arms race type of … you know, forces to attract capital and talent perhaps more efficiently, more advantageously, without having to defend any of the melting ICE, that is something we think is underestimated.

“So, sure, there are lots of legacy companies, they’re all … if you listen to what they are staying, they all sound like they are Tesla and in many ways they’re frankly obsessed with Tesla, if you listen to 30 seconds of a Volkswagen or a GM … or … you’d think they didn’t sell any internal combustion cars, and it turns out they sell 98% of their revenue by ICE.

In the past, I mentioned that Jonas was more likely to read what GM has said and just believe it, since that is what most analysts are trained to do. In fact, as recently as December I called Jonas out specifically when talking about how analysts just believe what they are fed. When I heard this, I literally stopped what I was doing and listened to his response again. Twice.

I’m not saying that Jonas is reading my articles or learning anything from me, but I think that Jonas’ display of healthy skepticism is a huge break with the norms and could be the beginning for traditional auto analysts understanding how to best value Tesla in the future.

The anchor then says, and although you can tell he is a skeptic of Tesla, I find it interesting how he framed it: “[Legacy auto] was being valued as if they were going out of business, now they are starting to get a little of the Tesla halo. I’m just wondering if you get a bigger bang for the buck by owning some of these?”

Jonas’ reply is stunning:

“We think that there is great potential for Volkswagen and for many other legacy OEMs — the value of their EV assets may still be potentially very, very undervalued by investors. The thing that we think is being ignored, is the 98% of their revenues that is coming from ICE may be dramatically overvalued. Guy, we’re running scenarios where the value of ICE is massively negative, so these auto companies have the burden of managing out this asbestos-like, toxic tort-like, tobacco-like liability, and still being able to attract ESG money to be an EV winner, and we think that will prove … that will force these companies into these uncomfortable but necessary strategic outcomes.

So, 10 months ago when I was trying to figure out if Jonas was saying that GM’s ICE business was worthless … he actually may have been. This is huge news, and the biggest takeaway here is that we are now starting to have traditional, legacy auto analysts declaring publicly what we’ve all known for a while — the internal combustion engine is dead, and is nothing but a major, massive burden on these companies that built up to support it. (Editor’s note: How long have we been saying this? I don’t know, but this article was 5 years ago: “What Goes On In The Minds Of Auto Execs?“)

Expect to hear more declarations like this in the near future. And expect legacy auto to respond with more and more press releases about future projects, while still having no path forward other than begging their governments for bailouts to manage the divorce from ICE.

Jonas makes one other statement I feel is worth noting. He explains how you can get to the revenues of Tesla. He says:

“… and getting software like and software derived revenues from that installed base, when you start doing that, frankly, you have Tesla not covered by old-fashioned auto analysts like me. If, frank … I … I … I … — and I genuinely believe this, Guy — if we at Morgan Stanley do our job properly over some number of years, [Tesla] will be covered by our tech or software team […] because it will make sense, that will be the model and they can comp it versus those type of stocks instead of looking at a legacy auto company and saying Tesla looks expensive and dropping the mic.”

This is an amazing moment of reflection to me, with Jonas recognizing why all of the traditional analysts missed the boat on Tesla for so long. He still said things that I don’t agree with in the interview, but to hear a mainstream analyst recognize three major points that I and other “retail” Tesla analysts have been making for ages to a skeptical media is refreshing.


First, kudos to Jonas for being willing to change his mind, and to explain those changes. The world is a far more interesting place if you’re willing to challenge your assumptions about anything, and declare that you’re wrong and switch sides on a problem. I love doing this myself, and it’s part of why I started writing here on CleanTechnica — I kept seeing only bull cases for Tesla and wanted to publish my work to see if anyone could prove me wrong. I’m excited to say that years after I started, I only feel more confident in my research about Tesla.

Second, the fact that Jonas is saying this stuff publicly feels like a new beginning. While I don’t give Tesla price targets because I think doing that is goofy, as the market never has and never will react cleanly for valuation, so it’s silly to try, I do feel that as long as there is a chorus of voices out there stating that Tesla is way overvalued for reasons that aren’t legit and completely missing the rest of the story, it can be seen as a potential time to purchase the stock, if that’s what you’re into. Again, don’t buy it because you think I said you should — I’m literally a puppet — but until the market comes to a more solid consensus about what it is, if the side declaring it’s just a car company is wrong, then when Tesla proves it isn’t, the stock will again go up (I assume).

Third, if you didn’t believe it before, believe it now. Even traditional auto analysts are running scenarios that give internal combustion engines massively negative valuations. In scenarios like that, it means you and I have a personal valuation worth more than any internal combustion engine business does right now. And if we have traditional auto analysts saying this out loud, on places like Bloomberg, it means that legacy auto knows it. It’s why they’re pushing out all the information about their new EVs. Will they have enough time to save themselves?

Or will they have to beg the government to bail them out? Again?

Don’t think that’s where we’re headed? I need to make some more time to talk about coal sometime soon, and the massive collapse in that industry’s value over the past 10 years. I anticipate a similar collapse of ICE valuations in the next 5 years. All right, now, where to find an extra four hours a day …. hmmm ….?

*Disclaimer: I am a Tesla [NASDAQ:TSLA] shareholder who has purchased shares within the preceding 12 months. Research I do for articles, including this article, may compel me to increase or decrease stock positions. However, I will not do so within 48 hours after any article is published in which I discuss matters that I feel may materially affect stock price. I do not believe that my voice could or should influence stock price by itself, and I strongly caution anyone against using my work as your sole data point to choose to invest or divest in any company. My articles are my opinion, which was formulated using research based on publicly available data. However, my research or conclusions may be incorrect.

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Frugal Moogal

A businessman first, the Frugal Moogal looks at EVs from the perspective of a business. Having worked in multiple industries and in roles that managed significant money, he believes that the way to convince people that the EV revolution is here is by looking at the vehicles like a business would.

Frugal Moogal has 88 posts and counting. See all posts by Frugal Moogal