US automakers had a tough week — with a bright side for buyers

Wall Street seems skeptical about the direction in which America’s largest automakers are heading.

The Detroit Three and Tesla reported earnings this week. Tesla’s profits fell sharply from a year ago — again. Stellantis also reported a profit crash. Ford missed expectations. And General Motors? Well, GM had a great quarter — but investors Still caused the Detroit car manufacturer’s share price to fall.

So what’s going on?

There are many factors. Some are specific to individual companies: Tesla CEO Elon Musk’s polarizing comments, Stellantis’s packed dealerships, GM’s problems in China and Ford’s hair-raising warranty costs.

But some trends are industry-wide. Car buyers have more leverage than they did a year or two ago, when supply was so tight that people regularly paid more than list price just to get a car home. Now, prices are down from a year ago, and incentives (rebates and deals designed to entice buyers) are back.

This is good news for car buyers, but not for corporations.

Then there is the issue of electric vehicles.

Selling electric vehicles is a challenge even for Tesla

After a surge, EV sales are now growing more gradually. The transition from early adopters to average buyers is always difficult. Buyers also have concerns about charging infrastructure, and EVs have become increasingly politicized in a polarizing election year.

Tesla, the company that redefined how the world sees electric vehicles, saw its profits fall more than 40% from a year ago. Sales are down year over year, even as global car sales rise.

Musk had previously warned that the company was “between two big waves of growth,” but investors were still disappointed by the news. Shares fell 12% the day after the earnings call.

Tesla has been making aggressive price cuts to fend off competition that has squeezed profits. Meanwhile, details about the much-anticipated lower-priced vehicle remain scarce, as price remains a barrier for many electric vehicle buyers.

“Of course, we still deeply believe that electric vehicles are best for customers and that the world is moving toward fully electrified transportation,” Musk said on a relatively subdued earnings call.

He also confirmed a delay in revealing the robotaxi project. Many analysts are skeptical that Tesla’s robotaxi will receive regulatory approval to operate, but Musk is adamant that it is crucial to the company’s future earnings.

Traditional carmakers delay electric vehicle plans

Meanwhile, the Detroit Three and other global automakers are pouring billions of dollars into EV technology that is new to them. They are also sweating intense global competition from Chinese automakers and worrying about disappointing EV sales. Ford’s CEO called the company’s EV journey “humbling.”

Stellantis CEO Carlos Tavares told reporters Thursday that he has been saying for years that a storm was coming as companies shift to battery-powered cars. “We’re in the storm now,” he said. “I called it the Darwin period. We’re in it. It’s tough. I don’t know how long it’s going to last, but probably a few years.”

Ford and GM have delayed some electric vehicle launches, saying they need to meet consumer demand. Large trucks and SUVs powered by fossil fuels are a profit maker for both companies.

At the same time, Ford and GM are adamant that electric vehicles still have a bright future. “We think the electric vehicle market will continue to grow,” GM CEO Mary Barra told analysts on a call. “Electric vehicles are fun to drive — instant torque. I think our electric vehicles are beautiful to look at, they have the range, they have the efficiency.”

Ford CEO Jim Farley recently penned a love letter to electric vehicles, and he reiterated some of those points during his earnings call. “About 50% of car buyers would be better served by buying an electric vehicle,” he said, citing Ford data. “We really believe that … many Americans would see an electric vehicle as lowering their costs.”

It is important to note that both arguments for electric vehicles are based on consumer belief, not regulation.

Eyes on the elections

All four executives were asked about the upcoming presidential election between two candidates with strikingly different views on climate change and electric vehicles. The Biden administration’s EV-friendly policies and incentives could be reversed in a second Trump presidency.

“I think it’s really important for the entire company to have regulatory certainty,” GM’s Barra said, noting that such certainty hasn’t been there in years. Former President Donald Trump reversed many Obama-era policies, only to see another twist with the election of Joe Biden. “But I think we have the flexibility to moderate based on what we see.”

Musk, who has supported Trump, has said he believes Tesla would ultimately benefit if the U.S. government stopped supporting electric vehicles — even if the policy directly contributes to Tesla’s profits, as the company’s former policy chief noted on the X show.

Ford’s Farley suggested that it doesn’t really matter who wins the election, because no matter who is in office, companies will still have to match China’s prices for affordable electric vehicles to be globally competitive.

Tavares, speaking from the Netherlands and head of the French-Italian-American carmaker, responded to the question with a note of regret.

“Global warming is a bipartisan issue,” he told reporters, then corrected himself.Should be a bipartisan problem. Because the scientific community says if we don’t fix this, we’re going to die. … We should ask political leaders to think of this as a bipartisan problem to solve, with stability of rules.”