After peaking at almost $26, Ford’s (F) descent is a painful reminder that automotive operating in
cyclical markets. Markets bought both Ford and General Motors (GM) on the belief that their electric
vehicle plans would dethrone Tesla (TSLA). Now that F and GM stocks are close to one-year lows, they
are too cheap. Should investors bet on a rebound?
Technology investors value Tesla as a software company. Tesla leads the market in advanced features
and autonomous driving. Ford entered the consumer EV market with the Mach-E. It needed to borrow
the iconic branding to give the vehicle a lift. For now, EV sales are too small to increase Ford’s growth. In
addition, it relies on its gas-powered vehicle sales for profits.
The chip supply constraint shows no signs of easing. China’s week-long shutdown turned into over one
month. Even after Shanghai re-opens, the shortage will worsen. This hurts the automotive industry.
Stock markets are no longer bullish. Instead of betting on Ford’s EV plans to pay off in 5-10 years,
investors want proof.
General Motors committed billions to the EV transformation. These costs will hurt margins for several
years. Ford and GM stocks are cheap because markets are discounting the near-term profit weakness.
Tesla will continue to dominate the industry. Expect TSLA stock to outperform Ford and GM, at least in
the near term.
