The auto business is supposed to be in great shape. A surge in demand has kept dealer lots empty. New cars were in short supply during much of the COVID-19 pandemic because of parts shortages. The average price of a new car sold in America has hit almost $50,000. Dealers no longer have to aggressively offer incentives to bring in buyers. For manufacturers, it is heaven. (These are the best- and worst-built cars in America.)
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So, why have the shares of Ford Motor Co. (NYSE: F | F Price Prediction) and General Motors Inc. (NYSE: GM) dropped sharply in the past year? The Dow Jones industrial average is up 4%, but shares of the two big American automakers are down by 10%. These companies have two significant problems. They have to support huge legacy gasoline-powered car production. And they are not electric vehicle (EV) companies by any stretch of the imagination.
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Tesla Inc. (NASDAQ: TSLA) has by far the largest share of the EV market in America. It has grown from a startup to a major corporation. It could sell as many as 2 million cars this year. Tesla’s market cap is still tenfold greater than GM’s or Ford’s. Ford and GM have a great deal of catching up to do. And, they not only have to be concerned with Tesla. Every major car company in the world is in the midst of spending tens of billions of dollars for a future they believe will be “all electric.” Some estimates are that over half the cars sold in the world in 2030 will be EVs.
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Ford and GM sold very few EVs last year. In each case, in the United States, it was in the tens of thousands. China is a more competitive market for EVs because of local manufacturers. That means GM and Ford will find it almost impossible to be EV forces in the world’s largest auto market by far.
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GM and Ford are beaten down, and for good reason.
Ford and GM Beaten Down by Market
© Shattered (CC BY-SA 2.0) by Bill Burris
Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.
McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.
His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.
A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.
TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.
McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.
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