GM and Ford face investor scrutiny over pricing power and EV losses

General Motors (GM) and Ford Motor Company are bracing for eyebrows to be raised as they get ready to report their quarterly results, with questions over pricing power in the gasoline vehicle market and losses from electric vehicle (EV) projects weighing on investors.

Ford will report results for the July to September period on October 28, with GM due on October 22. GM CEO Mary Barra also says traditional gas powered vehicles will generate profit margins, but are not at peak levels, and are seeing increased sales in electric vehicles. The more than 33 percent surge in GM's stock this year is tied to strong sales in gasoline models and two upward revisions of its annual profit forecast.

By comparison, however, Ford has struggled, sporting quality problems and enormous EV losses, which have led to an 8 percent fall in the automaker’s stock this year. In real life, however, analysts at Deutsche Bank have warned that Ford could perform poorly in the next quarter because it has too much inventory.

And Wall Street isn’t convinced that consumers are willing to pay the record prices for trucks and SUVs, as their desire to spend more slows with rising interest rates and an economic uncertainly. While the average listing price of new vehicles grew 2% month-on-month in October according to recent data from Cox Automotive, the average listing price for used vehicles also increased 2% during the same time frame. But that figure is a 1 percent increase over year ago, indicating perhaps pricing has peaked.

As consumers put a coat of caution over their wallets, automakers have been forced to drastically cut vehicle prices, a far cry from the pricing power during previous supply chain disruptions. However continuing concerns on peak pricing and uncertainties in EV strategies remain, Deutsche Bank commented.

Ford is soon to cancel its electric three-row SUV in favor of profit, while GM is turning to more profitable gasoline powered models. Like GM, Volkswagen has also slowed its EV production goals. The two companies are eyeing market share in declining rival Stellantis as investors and analysts worry about how wider, economic factors are affecting consumer behavior. Even with a recent Fed rate cut, auto loan rates and vehicle affordability aren’t much better, and consumer preferences are tilting toward less expensive compact crossovers, said Cox Automotive Chief Economist Jonathan Smoke.