How are automotive manufacturers like General Motors and Ford planning to convince investors of the effectiveness of their policy directions through financial reports? This may prove to be a challenging task.
General Motors (GM) recently released its quarterly earnings report, while its competitor Ford is set to announce its results on the 28th of this month.
Earlier this month, GM CEO Mary Barra asserted that the profit margins on traditional gasoline vehicles have not yet peaked and that electric vehicle sales are on the rise. Due to strong sales of gasoline-powered models, GM has revised its full-year profit forecast upward on two occasions. The company’s stock has surged over one-third this year.
In contrast, Ford has struggled with quality issues and incurred billions in losses related to electric vehicle production, resulting in an 8% decline in its stock price this year. Analysts from Deutsche Bank indicated that Ford may fall short of expectations this quarter, particularly as it grapples with bloated inventory levels.
With rising interest rates and growing concerns about the overall economy, Wall Street has been questioning whether consumers will continue to purchase trucks and SUVs at historically high prices. According to a recent report from Cox Automotive, the average price of new vehicles rose by 2% in October, reaching $47,823; however, this represents only about a 1% increase from the previous year, suggesting that prices may have hit a ceiling.
As cautious consumers shy away from bulk purchases, automakers are compelled to lower vehicle prices, representing a stark contrast to a few years ago when supply chain issues limited the pricing power manufacturers had over new models.
The Deutsche Bank research report stated, “Concerns regarding peak pricing and uncertainties surrounding electric vehicle strategies and penetration rates pose medium- to long-term threats. Additionally, the upcoming elections in November could influence electric vehicle policies in some way.”
As electric vehicle sales growth slows, both Ford and GM are focusing on producing more high-margin gasoline-powered models, such as Ford’s Maverick pickup and GM’s Chevrolet Trax small SUV.
In August, Ford canceled its much-anticipated three-row electric SUV, citing profitability concerns, while GM has been making slow progress toward achieving its electric vehicle production goals.
