Vera Tikhonova
What’s next for Ford (NYSE:F) and General Motors’ (NYSE:GM) EV businesses as they battle increasing competition and shifting macro headwinds?
We asked Seeking Alpha analysts Luca Socci and Envision Research for their thoughts.
Luca Socci: Steel tariffs, access to rare-earth minerals, and cooling consumer enthusiasm for still-expensive EVs have caused unexpected setbacks in the strategies Ford (NYSE:F) and GM (NYSE:GM) had designed to become market-leading players in this space after pouring billions into the transformation process. Recently, we learned that in an expanding U.S. car market, EV sales are still declining, threatening the returns on past investments many automakers were expecting to see from 2025 onward.
In addition to general change in the geopolitical and economic landscape, Ford (NYSE:F) also kept facing quality control issues that even paused F-150 Lightning production for a couple of months. Once solved, Ford (F) had to halt Mustang Mach-E sales due to a door-locking issue caused by a discharge of the battery. General Motors (NYSE:GM), on the other hand, has just recently achieved EV profitability, but now pushes together with other legacy automakers to overturn gas-powered cars banning regulations.
While rare earth access seems to have been solved (for now), and higher input costs due to steel tariffs could be a temporary issue as the U.S. strengthens its domestic output, the real challenge comes from rethinking the model lineup for the next three to five years. To this extent, it seems an EV-only world won’t appear soon. Rather, recent developments suggest we are going in the direction of an automotive space presenting multiple powering solutions. In particular, the trend I consider the right compromise between EVs and ICE is developing PHEV solutions, which seem to meet the consumers’ favor both in terms of pricing and versatility.
I think both Ford and GM now understand that investing big in only one trend can backfire since trends, by nature, can suddenly change due to preference shifts or political turns. We will see GM (GM) and Ford (F) moving more cautiously in an endeavor that could make many shareholders happy when they see that capex is more under control.
Envision Research: I am not optimistic about their EV prospects judging by the updates provided in their recent earnings report for fiscal Q1 2025. More specifically, in the earnings report, GM (GM) stopped providing a target for improvement in EV profitability. For me, I expect the volumes to be below its prior target of around 300K. Ford (F), similarly, also suspended forward guidance in its fiscal Q1 earnings report.
The root causes for the above uncertainties are similar in my mind, and include ongoing supply chain disruptions, risks related to tariff charges, potential retaliatory actions from U.S. trading partners, and policy uncertainty related to emissions regulation. Looking past these immediate issues, I consider China’s auto-manufacturing ecosystem to be fundamentally more self-sufficient than the U.S.’s. As such, I expect GM (GM) and Ford (F) to have trouble competing with Chinese automobile manufacturers like BYD (OTCPK:BYDDF) (OTCPK:BYDDY) in the long term.