Ford (F) peaked in January 2022, at the height of the stock’s bull market. Rivian (RIVN) had not dropped
by that much and the central banks did not worry about inflation.
Five months later, Ford and General Motors (GM) are nowhere near the highs. Their promise to electrify
the product line is several years away.
Both firms are facing increasing pressure from impatient markets. The companies rely on gas-powered
vehicles for revenue. Supply constraints limit sales volumes. This is hurting profits while expenses keep
rising.
To meet their ambitious electric vehicle plans, GM and Ford need billions of dollars. Ford will make at
least a few billion from selling Rivian stock. Even after RIVN stock peaked at $180 and traded to as low
as $20, Ford has capital gains. Time could run out if stock markets keep falling. The more Rivian shares
fall, the fewer gains Ford will realize.
Value investors cannot pass the discount on automotive stocks. They have major uncertainties ahead that
management must address. The companies need to carefully pivot from gas-powered products to EVs.
This comes with great risk.
F and GM stock is discounted enough to price in the challenges ahead. Consumer demand for vehicles is
still healthy. When supply improves, so too will their quarterly results.
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