In the last year, Ford (F) and General Motors (GM) boasted to investors that their electric vehicle ambitions would renew growth. Since then, the automotive and EV industry tackled a chip shortage and high raw material costs.
Ford’s 5-10 year plan is achievable. It will sell more EVs than gas-powered cars. Similarly, GM’s investment in Cruise will further its commitment to the green market. Stock markets are less patient waiting for both firms to realize the promised growth.
Selling pressure for auto manufacturers may worsen in the months ahead. Raw material costs are rising. Nickel and aluminum are some of the input costs that may not fall. Lithium, a key ingredient for batteries, are priced significantly higher in 2022. Prices could keep rising. This will force F and GM to raise EV prices.
Consumers, already stretched from high inflation, may balk at the higher prices. As they cancel orders, investors will re-evaluate the potential market size for Ford’s Mach-E. In the last month, F and GM stock stalled. They are finding support at the 20-day moving average. Still, Ford has a modest dividend yield while GM does not pay any dividends.
Investors may exit the automobile industry, seeking sectors that are immune to inflation instead.
