Ford Motor Co. (NYSE: F) and Honda Motor Corp. (NYSE: HMC) are among the most obvious auto stock market losers this year. Honda has a catalyst that could move its stock higher. Ford does not. It may need a transformative deal to get back on track financially and among shareholders.

Ford’s Headwinds

Honda’s stock rose 14% on news it may merge with Nissan. That leaves it down 13% for the year. Ford’s shares are down 18% during 2024. The only things that might remedy its share problem are a surge in electric vehicle (EV) sales or massive earnings recovery. Neither is in the offing.

Ford has needed to retreat from much of its efforts in China, the world’s largest car market. Chinese EV makers have pushed several large foreign car companies to the point where they have considered exiting. Honda has a related problem. The China retreat will not bite as much financially if a Nissan merger allows it to cut billions of dollars in expenses.

In the U.S. market, Ford ranks third with a share of 13% so far this year. Nissan and Honda together will have a share of 14.4%, which is about the share that second-place Toyota has. Market share leader General Motors has is about 17%.

Ford has had success cutting expenses. From an earnings standpoint, high warranty costs have mostly offset these. This warranty issue does not plague Nissan and Honda. A Honda-Nissan merger would allow deeper cost cuts compared to those Ford’s made. The redundant costs between Nissan and Honda must be enormous.

The Honda merger with Nissan points out Ford’s primary challenges. It has lost ground in China. It may have a more powerful rival in the United States. Finally, the company’s EV future is dim. When investors look at Ford, they have to ask themselves what it can do to reinvent itself. The answer is “not much.”

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