General Motors (GM) and Ford, two of America’s most iconic automakers, are facing an increasingly difficult landscape. Their stocks, among the cheapest in the S&P 500 Index, might seem like bargains at first glance. However, Wall Street analysts are warning investors that these low prices don’t necessarily present a buying opportunity.
Rising global risks, shifting consumer preferences, and looming trade tariffs are painting a concerning picture for the future of these companies. In this article, we explore the key challenges threatening GM and Ford’s growth, the reasons behind analysts’ bearish stance, and what lies ahead for the two automotive giants.
GM and Ford Face Mounting Risks | The Declining Appeal
Over the past decade, GM and Ford have been struggling to maintain investor confidence. The latest stock recommendations reflect this downward sentiment:
- More than 9% of analysts covering GM have a “sell” rating—the highest level since 2015.
- For Ford, 27% of analysts recommend selling—the worst level since at least 2010.
This trend signals growing scepticism about their ability to navigate industry challenges, especially as they attempt to transition into electric vehicles (EVs) and autonomous driving while dealing with significant financial and operational hurdles.
While GM’s stock currently trades at 4.3 times its 12-month forward earnings and Ford at 6 times, these low valuations have not attracted investors. The average price-to-earnings multiple for the S&P 500 Index is 22, underscoring the disparity between these legacy automakers and the broader market.”There might be the risk of a value trap,” analysts Steve Man and Peter Lau from Bloomberg Intelligence cautioned. “The stocks are cheap, but fundamentals are not looking good. The industry is getting a shake-up, and the businesses are low margin.”
A Tough Earnings Season
Recent earnings reports have further solidified concerns:
- Ford warned of significantly lower profits in 2025 due to declining vehicle prices and rising costs related to new model launches.
- GM projected a modest improvement in profitability, but its outlook failed to excite investors.
Adding to the turmoil is the impact of potential tariffs and increasing geopolitical uncertainty, factors that could significantly affect both companies’ supply chains and manufacturing costs.
Tariffs and Trade Wars: A Looming Threat
The auto industry is highly vulnerable to trade policies due to its complex global supply chain. With former President Donald Trump pushing for 25% tariffs on Canadian and Mexican goods, the cost of production for GM and Ford could skyrocket. Bloomberg Intelligence estimates that if these tariffs go into effect, it could add at least $3,500 in costs per vehicle—a burden automakers may struggle to absorb or pass on to consumers. The ongoing U.S.-China trade tensions further complicate matters. A new 10% tariff on Chinese imports has already been imposed, increasing expenses for automakers relying on Chinese-made components.
Industry Expert Insights
Bernstein analyst Daniel Roeska highlighted the prolonged uncertainty surrounding U.S. trade policies, noting that this lack of clarity creates a high-risk environment for auto investors.
“While the delayed implementation of tariffs gives carmakers additional time to plan their responses, the prolonged uncertainty complicates the U.S. auto sector from an investment standpoint,” Roeska wrote.
For now, analysts suggest that investors should wait for more concrete policy developments before making any major moves in the auto sector.
The EV Transition: A Double-Edged Sword
Both GM and Ford have committed billions of dollars to develop electric vehicles (EVs) and autonomous driving technologies, but this transition is proving to be a costly and challenging endeavour. While the EV market is growing, the demand for electric vehicles has not met expectations, especially in North America. Tesla, China’s BYD, and tech-driven companies like Alphabet’s Waymo are leading the charge, leaving GM and Ford struggling to catch up.
Financial Strain of EV Investments
The costs associated with EV production remain high due to:
- Expensive battery technology
- R&D and software development costs
- Infrastructure investments (charging stations, supply chains, etc.)
Ford, for example, recently had to scale back some of its EV expansion plans after facing production challenges and slower-than-expected demand. Similarly, GM’s bold EV push has yet to deliver substantial returns, further straining its financials.
The Competition Factor
Tesla’s aggressive pricing strategy, China’s dominance in battery production, and new entrants flooding the EV space are making it difficult for GM and Ford to establish a foothold. Competitors like Rivian, Lucid Motors, and Polestar are attracting EV buyers looking for innovation, leaving traditional automakers in a difficult position.”We are not a buyer here because the traditional automotive business, which is a tough business to begin with, is about to get disrupted,” said Ivana Delevska, chief investment officer at Spear Invest.
Can GM and Ford Adapt to a Changing Industry?
For GM and Ford to remain competitive, they need to aggressively innovate and adapt to changing consumer preferences.
- Stronger EV offerings: Both companies need to make their EV models more affordable and competitive.
- Improved software integration: The future of driving is autonomous and software-driven, requiring major investment in AI and digital interfaces.
- Expanding hybrid options: While fully electric vehicles are the future, hybrid models could help bridge the gap for consumers reluctant to switch entirely.
- Cost-cutting and efficiency: Both companies need to streamline operations and focus on high-margin vehicles to sustain profitability.
Final Thoughts: Should Investors Stay Away?
Despite their historic legacy, GM and Ford are facing one of their toughest battles yet. While their stock prices may seem appealingly low, the risks far outweigh the potential rewards at the moment. While GM and Ford may have the resources to survive, they will need to undergo major transformations to thrive in the future auto industry. For now, analysts suggest taking a wait-and-see approach before investing in these stocks.
As the auto industry evolves, the fate of these two American giants will depend on their ability to adapt, innovate, and overcome mounting challenges in a highly competitive market.