As the fervor around electric vehicles (EVs) tempers, General Motors (GM) and Ford (F) are pivoting back to their traditional strengths in gas-powered trucks and SUVs, betting on these mainstays to drive profits amid a challenging economic landscape. GM and Ford, which are set to report their first-quarter earnings next week, have seen a slowdown in EV demand due to a combination of high U.S. borrowing costs, aggressive competition from Chinese automakers, and macroeconomic headwinds. This shift has led the companies to recalibrate their focus towards more lucrative, gasoline-powered vehicles where they have historically excelled.
GM is expected to see a boost from strong sales of its Chevrolet and GMC trucks and SUVs, a segment where the company has consistently seen high profitability. Barclays recently increased its target price for GM shares, signaling confidence in the enduring demand for these models. Similarly, Ford's CFO John Lawler has highlighted the resilience of vehicle prices, supporting the company's optimistic profit outlook for the year. These developments suggest that despite the global push towards electrification, there is robust ongoing demand for traditional automotive offerings.
Market Overview:
-U.S. auto giants GM and Ford face pressure to demonstrate future profit prospects as EV growth stalls.
Key Points:
-Slowing global EV demand, Chinese competition, and high U.S. borrowing costs force a focus on gas-powered vehicles, the core profit driver.
-GM's strong truck and SUV sales are a bright spot, while Ford emphasizes commercial vehicles and reaffirms full-year profit outlook.
-Investor focus shifts from Tesla (TSLA) towards traditional automakers less reliant on EVs, like GM and Toyota.
Looking Ahead:
-GM must address its struggling Cruise robotaxi unit and potential China business restructuring.
-Ford prioritizes profitability for future EV investments and delays key electric vehicle programs.
-Both companies face the challenge of balancing traditional gas-powered vehicle success with long-term EV strategies.
However, challenges persist, especially in adapting to the evolving market dynamics that now favor a more balanced approach between EVs and internal combustion vehicles. Analysts like Chris McNally from Evercore (EVR) ISI note that as the momentum for EVs cools, attention is returning to traditional automakers like GM, Ford, and others who can leverage their existing strengths in non-EV segments. This shift is particularly pivotal as both companies navigate the complexities of transitioning to electric while maintaining profitability in their core businesses.
The strategic emphasis on gas-powered vehicles is likely to be a key theme in the upcoming earnings calls, where both companies will also address investor concerns about their respective strategies in China and updates on their autonomous vehicle divisions, such as GM’s Cruise robotaxi unit. GM and Ford's approach reflects a broader industry trend where automakers are seeking to balance innovation with the financial realities of current market demands, underscoring a period of recalibration in the automotive sector.
