Bank of America thinks the auto industry will outperform expectations this year as automakers adjust to a new regulatory environment that favors their higher-margin accretive internal combustion engine vehicles. The firm highlighted Ford Motor (F) and General Motors (GM) as top sector picks.
Analyst Alexander Perry and his team see the potential for upward estimate revisions given the shift away from electric vehicle and emissions mandates that limited profitability over the past several years.
Notably, 2026 was called the year of the pickup, as U.S. OEMs are seen being in a more favorable position to prioritize the production of their most margin-accretive gas-powered vehicles, especially pickup trucks, while delaying or cancelling lower-margin electric vehicle models. “We expect EV sales to decline 20%+ in 2026 from the phaseout of consumer incentives, while automakers’ cancellation of 40% of EV programs and extension of over 45% of ICE programs will pressure penetration over the next several years,” wrote Perry.
General Motors (GM) was assigned a Buy rating by BofA as a key beneficiary of recent regulatory changes, including the removal of CAFÉ penalties and greenhouse gas relief, which is enabling GM (GM) to mix shift to its most margin-accretive trucks/SUVs and away from unprofitable electric vehicles in the near term.
Ford Motor (F) also earned a Buy rating as a more favorable regulatory backdrop in the U.S. is expected to enable the Detroit automaker to mix shift to its most margin-accretive truck/SUV platforms.
Shares of General Motors (GM) were up 0.8% in premarket trading and are more than 60% higher over the last 52 weeks. Ford Motor (F) rose 0.9% in the early session and is 35% higher over the last year.