If the recent moves by U.S. automotive veterans General Motors (GM) and Ford (F) are any indication, the companies are shifting gears towards hybrids and plug-in hybrid electric vehicles (PHEVs). This shift doesn’t signal a detachment from an all-electric future but rather a tactical adjustment as the EV market experiences a chill due to soaring costs and charging infrastructure woes.
At the Bernstein Annual Strategic Decisions Conference in late May, both behemoths highlighted their heightened interest in hybrids, with Ford flashing a more fervent dedication to the concept.
Hybrid Vision Divergence
GM sets sights on rolling out plug-in hybrids by 2027, aligning with regulations and customer demands during the EV transition. CEO Mary Barra asserts that while EVs are the primary focus long-term, hybrids serve as a regulatory necessity, not an endgame due to emissions. The strategy is to strategically maneuver capital allocation.
In contrast, Ford’s CEO Jim Farley champions hybrids as a substantial segment of the company’s future, not merely a pit stop to full electrification. According to Farley, hybrids, like the popular F-150 hybrid, outpace their non-hybrid siblings in profitability, boasting features like exportable power adding premium customer value.
Roadmap to Expansion
GM and Ford are steering unwaveringly towards electrification for growth, accentuating software and subscription services’ pivotal role. The focus remains relentless on cost containment.
GM’s Ultium Drive system and battery facilities are set to fortify its electric mobility arsenal. The company is also tweaking its software-centered vehicle framework, targeting seamless updates and enriched user experience. To tighten financial belts, GM is trimming its product mix, leveraging AI for efficiency gains.
Ford is doubling down on digital integrations for streamlined manufacturing and indispensable in-house component production. The quest for competitive EV pricing through supply chain efficiency is in full swing. The company is investing in software and advanced driver-assistance features to revamp the consumer digital journey.
Investing in GM & F: A Calculated Move?
Amidst the evolving auto landscape, GM and Ford are priming themselves for a fruitful yield from robust vehicle line-ups, cost curbing initiatives, and a hybrid-EV balancing act. Northward-bound estimates further sweeten the investment pot for both majors.
On the financial frontier, GM and Ford stand on sturdy ground. By Q1 2024, GM flaunted $33.3 billion in automotive liquidity, including a significant cash reserve. Ford boasted $25 billion in cash and ample liquidity for market upheavals. Additionally, both GM and Ford sport attractive valuations with a Value Score of A.
Over the past six years, GM and Ford shares have clocked respectable gains, hinting at promising upside potential. Buoyed by their economical valuations and solid fundamentals, GM and Ford seem judicious investment picks, with any potential stock dips poised as an opportunity to accumulate more.
