Eyes on General Motors after Ford downshifts EV plans

Ford Motor Company (NYSE:F) pulled a stunner during the week by scaling back or delaying some of its electric vehicles and saying it would make more hybrid models. The Detroit auto giant pushed by a new electric pickup until 2026 and said its three-row electric SUV will not be ready to be sold until 2027 at the very earliest. In addition, Ford (F) delayed a second joint venture battery plant and cut back on shifts for the F-150 Lightning.

Investors and analysts have backed what is largely seen as a logical reaction to the changing EV landscape in terms of demand and pricing. Morgan Stanley now expects Ford's (F) 2024 EV volume to be closer to 100K units than 200K units. The firm now forecasts Ford's (F) EV penetration to be in the 5% to 10% range in 2023, which is a large drop from some of the rosier predictions of just a few years ago. UBS believes the moves by Ford (F) will be generally viewed positively by the Street, as they appear to be a more efficient use of capital and better match offerings to current consumer demands. However, some risk is seen that the hot demand hybrid demand over the last few months could cool off.

The Ford (F) strategy reset raises the question of whether the company would consider partnering with another player on its software-defined EV being developed in a California skunkworks operation. Morgan Stanley analyst Adam Jonas said he believes Ford's (F) ability to work with China-based players such as CATL, BYD Company, Xiaomi (OTCPK:XIACF) or others could be critical if the geopolitical sensitivities are worked out. The elephant in the showroom now is what General Motors (GM) will do about its electric vehicle strategy. GM is noted to have spent more time and money developing a vertically integrated in-house EV/battery platform that Jonas and his team believe is overdue for substantial re-scaling as GM looks to emphasize hybrids and internal combustion engines.

As for Stellantis (STLA), CEO Carlos Tavares has already gone public with his call for lighter electric vehicles due to the massive costs of materials for current-generation battery technology. Tavares thinks it will take time before a scientific breakthrough solves the battery density issue to justify large-scale pushes by the industry into electrification.

Meanwhile, an overarching question for investors is whether the slowdown in demand for electric vehicles is due to consumer affordability issues that could improve or if a new operating paradigm is setting up. Tesla's (TSLA) stunning miss with its Q1 deliveries report has set off some of those bearish thoughts.

Sector watch: Legacy auto stocks such as Toyota Motor (TM) +31%, Ferrari (RACE) +24%, General Motors (GM) +23%, Honda Motor (HMC) +18%, and Ford (F) +11% are all in positive territory for 2024. That's not the case for all-electric auto stocks, with Canoo (GOEV), Rivian Automotive (RIVN), Nio (NIO), VinFast Auto (VFS), Lucid Group (LCID), Polestar Automotive (PSNY), and Tesla (TSLA) all down at least 30% on a year-to-date basis.