The two have consistently tried to outdo each other in new car sales, performance and styling. GM has gained an edge in recent years thanks to a better financial position and an early shift to electric and autonomous vehicles. And most recently, third quarter results show that they knocked their opponents out of the game.
The investment landscape for U.S. automakers is increasingly diversifying as companies separated by just $1 billion in market cap have different solutions centered around electric and autonomous vehicles.
GM has diversified as much as possible around its self-driving car and battery businesses, with plans to offer exclusively electric vehicles by 2035. Ford is also moving to electric vehicles, while continuing to invest in its traditional businesses. Ford expects at least 40% of its global sales to come from electric vehicles by the end of the decade.
Meanwhile, both companies continue to rely heavily on the historically profitable sales of pickups and SUVs, renewing focus in this segment and leveraging billions of dollars in profits to invest in both self-driving and electric vehicles.
Wall Street analysts say they’re watching high-growth segments to see when and if any of Detroit’s automakers can come to the fore.
“It’s a very competitive industry and they’re all catching up very quickly,” said Edward Jones analyst Jeff Windau. It is difficult for them to maintain the distinction for a long time.”
Ford is undergoing a major restructuring as part of CEO Jim Farley’s capital turnaround plan, called Ford+. Meanwhile, GM cut costs years ago under CEO Mary Barra.
“GM is definitely operating at a much higher profit margin than Ford is cutting costs because they went through that pain a few years ago,” Morningstar analyst David Whiston told CNBC.
Wall Street maintains an average rating of “overweight” for both stocks, according to analyst reports compiled by FactSet. Shares of both automakers are down more than 30% this year as investors fear a golden age of their earnings during the Covid-19 pandemic is behind them as interest rates rise, inflation is high and people worry about an economic recession.
Both stocks have a market cap of about $54 billion and seemingly trade at the same time, though GM is priced at about $40 per share and Ford is closer to $14.
Invest in self-driving cars
Late last month, Ford announced it would disband its Argo AI autonomous vehicle unit, citing it lacked confidence in the project and its earning potential in the near future.
A day earlier, Kyle Vogt, CEO of GM Cruise, had made optimistic comments about the development of his company’s robotaxi (self-driving taxi) project, using words such as “open phase” to scale quickly” and promising “significant revenue” starting next year .
“We see a growing disparity between companies that use commercial drones and those that are still deeply disillusioned,” Vogt said. “The situation now is that the companies with the best products have taken the lead and are gaining momentum.”
GM Cruise recently said it was expanding its robotaxi service to cover most of San Francisco, months after the company launched a temporary fleet of overnight self-driving cars.
“GM clearly sees this as a long-term opportunity that they want to take advantage of,” said Sam Abuelsamid, principal analyst at Guidehouse Insights. And Ford says, ‘We think they’ll make it eventually, but it’s going to take a long time and now we have other concerns.’”
The “termites” Ford is dealing with include billions of dollars worth of electric vehicles and technologies to help those with weaker controls, such as the automaker’s BlueCruise Highway Self-Driving System.
Stuff and sell
GM was one of the first automakers to announce a multibillion-dollar investment in next-generation electric vehicles and aims to stop selling internal combustion engine vehicles by 2035.
But Ford is an easy company to surpass GM in electric vehicles, while GM prioritizes luxury cars with new battery technology, such as the Hummers worth more than $100,000, or the Bolt EV with older battery technology.
“GM entered the autonomous vehicle market earlier,” said Abuelsamid. But if you look at it from a broader perspective than the auto industry – the tech sector, being the first to do it doesn’t necessarily mean you’ll be successful.”
Ford sold 41,236 all-electric models in the first nine months of this year, while GM sold 22,830, most of which were older Bolt models.
Taking advantage of the electric vehicle campaign allowed Ford to ramp up production faster than GM and get more vehicles to dealers. The company has turned ordinary vehicles with traditional gasoline engines into electric cars by “filling” the battery into them.
GM, on the other hand, has come up with a special design for electric vehicles. Ford plans to follow that later, but for now the short-term approach has seen the company outperform sales and consumers don’t seem to mind. Ford also continues to make plug-in hybrids and plug-in hybrids, and instead of doing the same, GM has built a car no different from the all-electric Corvette.
Aside from Tesla, the industry’s leading electric vehicle manufacturer, GM is the only one to produce battery cases single-handedly, through four joint venture plants in the United States it has planned, one of which is in Ohio, which is already in operation. was put to use in commercial production early this year.
Similarly, Ford also plans to use $5.8 billion to build dual lithium-ion battery plants in central Kentucky through a joint venture with South Korea-based SK, but production is not expected to begin until 2026.
Jeff Windau also added that GM may have an edge over Ford in the short term, but that others could catch up in the coming years: “Being able to move forward a little faster is also an advantage, but it looks like there will be a lot of players again. who start the game in the same way.”
Check out CNBC
