Same industry, two increasingly different companies

Detroit — “Same industry. Two different companies.”

That’s how influential Morgan Stanley auto industry analyst Adam Jonas recently put it. general motors When ford motor — A bitter rival for over a century.

The two have always tried to outsmart each other in new car sales, performance and styling. GM has dominated in recent years on the back of an improving financial situation and an early transition to electric and self-driving vehicles. GM recently reported Third quarter results that, compared to fordknocked out of the park.

The investment case of the largest U.S. automaker is becoming increasingly diverse as the two companies, each with a market capitalization of only $1 billion, have different policies on electric and self-driving cars.

GM plans to diversify as much as possible, with a focus on its emerging battery and self-driving car businesses. Offer only electric vehicles by 2035. Ford, too, is moving to EVs, but at the same time, it continues to invest in its traditional businesses. Ford expects electric vehicles to account for at least 40% of global sales in this decade.

(Both companies will continue to rely heavily on their traditional sales of high-margin pickups and SUVs for the foreseeable future, refocusing their segments and leveraging billions of dollars in profits to grow self-driving and electric vehicles. increase investment in both

Wall Street analysts say they are watching the booming segment closely for when, or if, any of the Detroit automakers can differentiate.

“It’s a very competitive industry and they all tend to follow very quickly in that regard,” said Edward Jones analyst Jeff Window. becomes difficult.”

Ford is undergoing an extensive restructuring as part of CEO Jim Farley’s turnaround plan. Called Ford+. Meanwhile, the GM cost cutting A few years ago under CEO Mary Barra.

Morningstar analyst David Wiston told CNBC, “GM is now operating in a higher gear, with no doubt there’s a big gap between the two companies’ margins.” I experienced a lot of pain.”

GM has been quick to point out differences with Ford, and will likely do so again at Thursday’s investor event. But the message never seems to take hold.

According to an analyst report compiled by FactSet, Wall Street maintains an average rating of “overweight” on both stocks. Both automakers are down more than 30% this year amid investor fears that rising interest rates, inflation and a recession are delaying their earnings peak during the coronavirus pandemic.

Both stocks have a market cap of about $54 billion, but GM is trading at about $40 a share and Ford at nearly $14 a share, and appear to be trading alongside each other.

At the end of last month, Ford announced that Argo AI self-driving car unit disbanded I didn’t believe in the business or the foreseeable future monetization potential.

Ford Chief Financial Officer John Lawler said: told reporters on October 26.“We also came to the conclusion that we don’t necessarily have to create that technology ourselves.”

A day earlier, GM Cruise CEO Kyle Vogt provided bullish comments on the growth of his company’s robo-taxis business, including a “rapid scaling phase” with “meaningful revenues” starting next year.

“There is a growing separation between the companies that operate commercial driverless services and those that are still deeply disillusioned,” said Vogt, all but foreseeing Ford’s announcement to dissolve Argo. “What’s happening here is that the companies with the best products are getting ahead and accelerating.”

Cruise recently announced an expansion of its robo-taxis service to cover most of San Francisco. That was months after the company began commercially driving self-driving vehicles during limited hours of the night.

“GM clearly sees this as a long-term opportunity and wants to get involved,” said Sam Abuelsamid, principal analyst at Guidehouse Insights. It will take time and we have more fish to fry now.'”

Ford’s other ‘fish’ includes billions of dollars spent on electric vehicles and low-performance driver-assist technologies such as the automaker’s hands-free BlueCruise highway driving system.

GM was one of the first automakers to announce and target multi-billion dollar investments in new electric vehicles. End sales of internal combustion engine vehicles by 2035.

But Ford has easily surpassed GM in EVs, and GM is prioritizing luxury models with new battery technology. Hummers over $100,000 Bolt EV with older battery technology.

“GM came first, just like with AV,” Abuelsamid said. “But if you look at the technology industry, not just the automotive industry, for example, being the first to enter the market in the long run doesn’t necessarily guarantee success.”

Ford sold 41,236 all-electric models in the first nine months of the year, while GM sold 22,830, mostly older Bolt models.

Ford benefited from its EV strategy and was able to start production earlier and have more vehicles in dealerships than GM. The company has converted a popular car with a traditional gas engine into an electric vehicle by “stuffing” it with a battery pack.

GM, by contrast, built a purpose-built EV architecture. Ford will eventually follow suit, but its short-term approach gives it a head start on sales and consumers don’t seem to mind. Ford also continues to produce hybrids and plug-in hybrids, but GM has decided not to do so. Other than a potential “electrified” Corvette.

GM is the only non-leading automaker. Tesla Producing its own battery cells through US joint ventures The company has announced plans for four joint venture battery plants in the US, including a plant in Ohio that began commercial cell production earlier this year.

Ford has similar plans, allocating $5.8 billion to build two lithium-ion battery plants in central Kentucky through a joint venture with South Korea-based SK, but production won’t start until 2026. not expected.

Edward Jones’ Windau said GM may be ahead of Ford in the short term, but other companies could catch up in the next few years.

“It’s an advantage to be able to move forward a little faster,” he said. “A lot of players seem to be following a similar approach.”