GM, LG to upgrade Tennessee plant for lower-cost EV battery cells amid ongoing EV drag

What happened

General Motors and LG Energy announced plans to upgrade their Tennessee battery plant to produce lower-cost cells, aiming to improve EV economics even as EV sales falter. The move comes after GM's Q4 2025 U.S. EV sales dropped 43% year-over-year following the loss of the $7,500 federal tax credit, and the company took a $6 billion EV-related writedown in January 2026. While lower battery costs could help narrow EV losses over time, the larger challenge remains depressed EV demand and policy uncertainty, which have forced GM to cut capacity and delay projects. The master report's bearish stance highlights that GM's North American truck and SUV profits are carrying the transition, but EV operations remain loss-making and a source of recurring charges. Thus, this plant upgrade is a marginal positive but does not address the core demand problem or the company's premium valuation at ~27x trailing EPS.

Implication

For investors, the lower-cost battery cells may help GM reduce EV losses incrementally, but the company still faces structural headwinds: weak EV demand without subsidies, limited hybrid offerings, and ongoing China impairments. The stock trades at ~27x trailing EPS and 8.7x EV/EBITDA, embedding expectations that $12-13B EBIT-adjusted and buybacks are sustainable. However, if North American truck/SUV margins soften even modestly, or if EV and China charges continue, the stock could de-rate toward the bear case implied value of $55. The news does not change the recommendation to trim above $90, as the current price is near that threshold. Long-term investors should wait for clearer evidence of EV profitability and stabilized margins before considering an entry near $65.

Thesis delta

The thesis remains largely unchanged: GM's core profitability is fragile and policy-sensitive, and the stock's premium valuation offers little margin of safety. The Tennessee plant upgrade is a minor positive for EV cost reduction but does not offset the structural demand weakness or the recent writedowns. Therefore, no shift in the overall bearish stance; the news reinforces that management is trying to mitigate EV losses but hasn't solved the fundamental problem.