General Motors (GM) and Ford Motor Company are set to face a tough crowd when they report their third-quarter results for 2024, with investors eager to see if Detroit’s traditional cash cows—gas-powered trucks and SUVs—still have strong pricing power, and whether the losses from their electric vehicle (EV) ventures are finally shrinking.
As GM prepares to announce its earnings on October 22, and Ford following on October 28, both automakers are grappling with significant challenges in the EV space while navigating a turbulent market for their bread-and-butter gasoline cars. Wall Street remains skeptical, particularly given the broader economic pressures and high interest rates that could dampen consumer demand for big-ticket items like vehicles.
GM’s Confidence vs. Ford’s Struggles
GM CEO Mary Barra has remained bullish, recently stating that the profit margins on their traditional gas-powered vehicles have not peaked yet. She also emphasized that their EV sales are finally starting to ramp up after years of heavy investment. GM’s stock reflects this optimism, rising over 30% this year thanks to two upward revisions of its annual profit forecast, bolstered by robust sales of gas-powered trucks and SUVs.
In stark contrast, Ford has been battling quality issues and mounting EV losses, resulting in an 8% drop in its share price this year. Analysts at Deutsche Bank have warned that Ford might fall short of expectations for the third quarter, particularly as the company struggles with inventory bloating—a signal that their pricing power could be fading. Ford has also been grappling with a billion-dollar loss in its EV division, further dimming investor confidence.
A Shifting Market for Gas-Powered Vehicles
For years, automakers have enjoyed the ability to command premium prices for their gas-powered trucks and SUVs. But with interest rates at multi-decade highs and concerns about the broader economy looming, Wall Street is questioning whether consumers will continue to shell out top dollar for these vehicles.
Recent data suggests the pricing power for traditional vehicles might be reaching its limit. According to a report from Cox Automotive, the average listing price for a new vehicle rose just 2% month-on-month in October to $47,823, which represents a mere 1% increase from the same time last year. The price growth slowdown suggests that automakers may have hit a ceiling in terms of how much they can charge customers without seeing a significant drop in demand.
EV Ventures Remain a Wild Card
Both GM and Ford have made bold bets on EVs, but they’re still waiting for those investments to pay off. GM has shown some early signs of progress, with Barra confident in their EV ramp-up. However, Ford’s EV efforts have been a drag on profitability, with mounting losses as they attempt to catch up to rivals like Tesla and expand their electric vehicle lineup.
Analysts from Deutsche Bank remain cautious, highlighting that uncertainties around EV strategies, market penetration, and profitability could continue to weigh on both automakers for the foreseeable future.
Pricing Power at a Crossroads
The real question for GM and Ford is whether their gas-powered vehicles can continue to sell at premium prices in a market increasingly defined by economic uncertainty and cautious consumers. Automakers are starting to lower prices on some models as buyers shy away from heavy purchases, a stark departure from the pricing power they commanded just a few years ago when supply chain issues kept inventories low and demand high.
“Concerns over peak pricing, as well as uncertainties around EV strategies and penetration, serve as mid- to longer-term overhangs,” Deutsche Bank Research noted.
As GM and Ford prepare to report their results, they must convince investors that their gas-powered vehicles can maintain their profitability, while showing real progress on the EV front to ensure they’re not left behind in the industry’s ongoing transformation.
