In a bold move, U.S. auto giants General Motors (GM) and Ford (F) are steering toward hybrids and plug-in hybrid electric vehicles (PHEVs). This shift comes as a strategic response to a cooling electric vehicle (EV) market, where consumer concerns about EV prices and charging infrastructure availability loom large. While a fully electric future remains compelling, GM and Ford are recalibrating their strategies to navigate the current automotive landscape.
During the recent Bernstein Annual Strategic Decisions Conference, held on May 29, both companies underscored their increased focus on hybrids, with Ford emerging as the more enthusiastic advocate of the hybrid concept.
The Hybrid Dilemma: Contrasting Strategies
GM is set to roll out plug-in hybrids by 2027, aligning with regulatory mandates and customer demands during the EV transition phase. However, GM’s CEO Mary Barra considers hybrids a stopgap measure, with EVs being the ultimate goal due to their zero-emission nature. Barra highlighted the strategic allocation of capital in this transitional phase.
On the other hand, Ford’s CEO Jim Farley views hybrids not as a mere transition but as a solid pillar of the company’s future. Farley advocates viewing hybrids not as a bridge to full electrification but as profitable products in themselves. Notably, Ford’s emphasis on hybrids like the F-150 hybrid underscores their potential profitability and value additions for customers.
Mapping Out Growth Strategies
Both GM and Ford have committed to long-term electrification strategies, recognizing them as key drivers of future growth. Software and subscription services are gaining importance for future profitability as both companies intensify efforts to contain costs.
GM’s Ultium Drive system and battery facilities are poised to strengthen its electric mobility capabilities, while Ford is focusing on integrating digital technologies to streamline manufacturing and enhance energy efficiency. Both companies are investing in software enhancements and optimizing business processes to drive savings and enhance the customer experience.
Investment Potential: GM & Ford
For investors eyeing GM and Ford, both companies present compelling investment opportunities. With optimistic estimates for the current fiscal year, GM’s 2024 EPS estimate has been revised upward, as has Ford’s. Financially, GM enjoys robust liquidity, with significant cash reserves as of the last quarter. Ford, too, boasts healthy liquidity, coupled with attractive valuation metrics.
Both GM and Ford sport a Value Score of A and trade at attractive forward Price/Earnings ratios, well below industry averages. Moreover, with both companies witnessing steady stock price growth over the years, their current undervaluation and solid fundamentals bode well for potential investors.
In conclusion, GM and Ford, both bearing a Zacks Rank #3 (Hold), present prudent investment options amidst their hybrid-focused strategies and promising financial outlook. Investing in these automotive stalwarts, with their robust growth plans and competitive positioning in the hybrid and EV market, could prove rewarding in the long run.