The inverted yield curve in the U.S. treasury suggests that a recession is certain. That is, short-term bond yields are higher than long-term bonds. When the likelihood of a slowdown rises, why should investors consider economically sensitive sectors?
The automotive sector has yet to price weaker demand. Although General Motors (GM) is trading in a $33.70 to $43 cycle, speculators bet that its electric vehicle ambitions will pay off. Similarly, Ford (F) is pivoting from gas-powered vehicle sales to EVs for future growth.
Ford is an especially troublesome investment. The company expects to lose a disturbing $3 billion in the EV business this year. In the last two years, it lost similar amounts. It is investing heavily in new technology. Ford is willing to spend the $10 billion it made from internal combustion and gas-electric hybrid vehicles earned in the last two years.
GM and Ford must overcome the increased interest in Tesla’s (TSLA) Cybertruck. GM’s first-ever Silverado EV may lose momentum too soon. Ford enjoyed positive reviews for the F-150 EV. With most F-150 EVs priced at around $100,000, expect limited demand.
Your Takeaway
Neither Ford nor GM is good for EV plays. They have more risk than Tesla. Tesla trades at a premium because it continues to dominate the EV field.
