When CEO Jim Farley joined Ford Motor (F) on October 1, 2022, shares rose steadily. It peaked at
$25.87. Selling pressure mounted for most of 2022 when markets realized the electric vehicle vision will
not increase Ford’s profits.
General Motors (GM) is in a similar predicament. After its splashy EV product roadmap, investors sold
the stock when reality set in. Both Ford and GM have billions in development costs. In addition, raw
material costs for batteries keep rising. Inflation will push component costs higher. Vehicle costs,
including gas-powered ones, may only rise from here.
Consumers are likely at the point where they can no longer justify the high price of a new vehicle. The
used car market is also collapsing. Last week, CarMax (CMX) fell from $90 to $66. It posted revenue of
$8.14 billion, up by only 1.9% Y/Y. The CEO blamed a challenging used car industry in the quarter.
CarMax will more aggressively push sales online and in-store. This will include cutting costs for its used
vehicles. The influx of supply in the automotive industry will hurt Ford and GM. Consumers who put a
deposit on vehicles may cancel their orders.
The stock is cheap for a reason. GM and Ford have limited upside.
