General Motors (GM) and Ford Motor are preparing to report their Q3 2024 results, with both automakers facing challenges that could affect investor sentiment. GM will release its results on October 22, followed by Ford on October 28, and both companies are under pressure to demonstrate strong performance in the gasoline-powered vehicle market while managing losses in their electric vehicle (EV) divisions.
Despite economic headwinds, GM’s CEO Mary Barra has expressed confidence that profit margins on gas-powered vehicles have not yet peaked, with the company seeing robust sales in that segment. GM has already raised its annual profit forecast twice this year, largely driven by the strong performance of models like the Chevrolet Trax. As a result, GM’s shares have surged by over a third in 2024, and analysts expect Q3 revenue to increase by about 1% to $44.5 billion.
However, the company’s EV sales have slowed to ramp up, and production goals have been tempered. Investors are also watching for updates regarding how broader economic factors, such as consumer interest rates and affordability, may affect the future outlook for gas-powered and electric vehicles.
On the other hand, Ford has faced a more difficult path in 2024. The automaker’s shares are down 8% for the year, partly due to billion-dollar losses in its EV business and ongoing quality control issues. Analysts from Deutsche Bank have already flagged concerns that Ford could miss expectations for Q3, citing high inventories and weaker-than-expected demand. Despite this, Ford is focusing on producing high-margin gasoline-powered models, such as the Maverick pickup, in an attempt to bolster profitability.
Ford also canceled its much-anticipated electric three-row SUV in August, citing profitability concerns. This move has further raised questions about Ford’s EV strategy. Analysts estimate Ford’s Q3 revenue will grow by 2% to $42 billion, but investor confidence remains shaky.
Pricing Concerns and Shifting Consumer Preferences
One of the key issues for both automakers is whether they can maintain pricing power in the gasoline vehicle market. Steep interest rates and economic uncertainty have led to mixed results in vehicle pricing. While the average listing price for new vehicles rose by 2% month-on-month to $47,823 in October, it represents only a 1% increase from a year ago, signaling that pricing may have reached its ceiling.
With consumers becoming more cautious about large purchases, automakers have had to lower prices to stimulate demand. Additionally, the growing preference for compact crossovers, which offer better fuel efficiency and lower upkeep costs, is shifting the market away from larger, more expensive vehicles that traditionally generated higher margins for U.S. automakers.
Both Ford and GM have gained market share from rival Stellantis, which has struggled with weaker sales in North America. However, Wall Street remains concerned about automakers navigating the evolving EV adoption and pricing landscape. Deutsche Bank has noted that uncertainties around EV strategies, pricing, and market penetration will likely weigh on both automakers in the medium to long term.
As GM and Ford prepare to release their earnings, investors will closely watch for signs of improvement in the EV space and updates on how the broader economy influences consumer purchasing behavior. Analysts will also be paying attention to any commentary related to the upcoming November election, which could impact EV policies and incentives moving forward.
