Wall Street seems skeptical that major U.S. automakers are steering in the right direction.
The Detroit Three and Tesla all reported earnings this week. Tesla's profits were down sharply from last year — again. Stellantis saw profits crater, too. Ford missed expectations. And General Motors? Well, GM had a great quarter — but investors still dinged the Detroit automaker with a drop in share prices.
So what's going on?
There are a lot of factors. Some are specific to individual companies: Tesla CEO Elon Musk's polarizing comments, Stellantis' overcrowded dealer lots, GM's struggles in China and Ford's wince-inducing warranty costs.
But some trends are industrywide. Car buyers have more leverage than they did a year or two ago, when supply was so tight that people would regularly pay over sticker price just to bring a car home. Now, prices are down from last year and incentives (discounts and deals to entice shoppers) are back.
That's good news for car shoppers, but not for corporations.
Then there's the question of electric vehicles.
An EV sales challenge, even for Tesla
After increasing sharply, electric vehicle sales are now rising more gradually. Making the leap from early adopters to the mainstream shopper is always tricky. Buyers also have concerns about charging infrastructure, and EVs have also become increasingly politicized in a polarizing election year.
Tesla, the company that redefined how the world considers electric vehicles, has seen profits drop by more than 40% from last year. Sales are shrinking year over year, even as global car sales rise.
Musk had previously warned that the company was "between two major growth waves,” but investors were still disappointed by this news. Stocks plunged 12% the day after the earnings call.
Tesla made aggressive price cuts to ward off competition, which has reduced profits. Meanwhile, there are still few details about a long-awaited cheaper vehicle, as price remains a barrier for many EV shoppers.
"We still, obviously, firmly believe EVs are the best for customers and that the world is headed for a fully electrified transport," Musk said on a relatively subdued earnings call.
He also confirmed a delay in the reveal of a robotaxi design. Many analysts are skeptical that Tesla's robotaxi will get regulatory clearance to operate, but Musk has been adamant that it's central to the company's future profits.
Legacy automakers delay their EV plans
Meanwhile, the Detroit Three and other global automakers are making billion-dollar investments in EV technology that's new to them. They're also sweating over stiff global competition from Chinese automakers and worrying about disappointing EV sales. Ford's CEO called the company's EV journey "humbling."
Carlos Tavares, the CEO of Stellantis, told reporters on Thursday that for years he'd been saying a storm was on the way as companies pivoted toward battery-powered cars. "Now we are in the storm," he says. "I was calling it the Darwinian period. We are in it. It is tough. I don't know how much time it's going to last, but possibly several years."
Ford and GM have both delayed some electric vehicles, saying they need to match consumer demand. Large fossil-fuel-powered trucks and SUVs drive profits for both companies.
At the same time, Ford and GM are adamant that EVs still have a bright future. "We do think the market for EVs will continue to grow," Mary Barra, the CEO of GM, told analysts on a call. "EVs are fun to drive — instant torque. I think our EVs have beautiful designs, the right range, the right performance."
Jim Farley, the CEO of Ford, recently wrote a love letter to EVs, and he reiterated some of those points on his earnings call. "About 50% of customers who buy automobiles would be better served buying an electric vehicle," he said, citing Ford's data. "We really believe ... that many Americans would find an electric vehicle lowering their cost."
Both of those arguments for EVs, notably, rely on winning over consumers — not on regulations.
Eyes on the election
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 rules and incentives could be reversed in a second Trump presidency.
"I think what’s really important to the company overall is to have regulatory certainty," said GM's Barra, noting that such certainty hasn't existed for years now. Former President Donald Trump reversed many Obama-era policies, only to see another U-turn after Joe Biden's election. "But I think we have the flexibility to moderate based on what we see."
Musk, who has endorsed Trump, said he believed Tesla would ultimately benefit if the U.S. government stopped supporting EVs — even though those policies directly contribute to Tesla's profits, as the company's former head of policy pointed out on X.
Farley, at Ford, suggested that it didn't really matter who won the election, because no matter who was in office, companies will have to match China's affordable EVs to be competitive globally.
And Tavares, speaking from the Netherlands as the head of a French-Italian-American automaker, responded to the question with a note of regret.
“Global warming is a bipartisan problem," he told reporters, then corrected himself. "Should be a bipartisan problem. Because the scientific community says if we don’t fix it, we die. ... We should ask the political leaders to consider this as a bipartisan problem to be solved, with stability on the rules."
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