Automotive powerhouses General Motors (GM) and Ford (F) are steering their course towards hybrids and plug-in hybrid electric vehicles (PHEVs) in a strategic maneuver. This shift, while not abandoning the electric vehicle (EV) trajectory, is a calculated response to consumer apprehensions over EV pricing and charging infrastructure availability, amidst a cooling EV market.
At the recent Bernstein Annual Strategic Decisions Conference, both companies underlined their heightened focus on hybrids, with Ford showcasing a particularly robust commitment to the concept.
The evolving strategies of GM and Ford, their disparate outlooks on hybrid technology, and the investment appeal of these stocks come under the spotlight.
Distinct Perspectives on the Hybrid Horizon
GM is set to unveil plug-in hybrids by 2027, aligning with regulations and consumer preferences as the industry transitions to full electrification. CEO Mary Barra emphasized EVs as the overarching goal for GM and sees hybrid technology as a transitory phase due to their non-zero emissions nature. Barra noted, “We do see hybrids, because of the regulatory changes, be a part of it, but let’s remember with a hybrid, you have two propulsion systems on that vehicle. It’s not the end game because they are not zero emission.”
In contrast, Ford’s CEO Jim Farley perceives hybrids as more than a transitional step but a fundamental component of the company’s future landscape. Farley challenged the notion of hybrids as a mere bridge to full electrification, highlighting the profitability of many of Ford’s U.S. hybrids compared to their non-hybrid counterparts. He stated, “Many of our hybrids in the U.S. are now more profitable than their non-hybrid equivalents.”
Ford’s approach extends to a spectrum of energy solutions beyond pure EVs, including extended-range electric vehicles (EREVs) and varied PHEV applications, emphasizing the profitability and customer value of hybrids, such as the popular F-150 hybrid.
Navigating the Path to Expansion
Both GM and Ford are committed to long-term strategies for electrification, recognizing it as a key driver of growth. Acknowledging the critical role of software and subscription services in future profitability, they are resolute in their efforts to curtail costs.
GM’s Ultium Drive system and battery facilities are set to bolster its electric mobility capabilities, supplemented by a software-focused vehicle approach and cost-saving measures through AI integration. Ford, on the other hand, is prioritizing digital technologies for manufacturing efficiency, in-house production enhancements, and energy-efficient practices for competitive pricing.
The company is making significant investments in software and advanced driver-assistance systems to enhance the digital journey for consumers.
Considering Investment in GM & F
Both legacy automakers are strategically positioning themselves to capitalize on robust vehicle offerings, cost optimization endeavors, and a balanced approach to hybrids and EVs. As they navigate the evolving automotive terrain, their hybrid strategies could confer a competitive edge in the near term.
Financially, GM and Ford exhibit strong foundations. General Motors boasts substantial automotive liquidity, while Ford shows a healthy cash position and liquidity levels. Moreover, both companies present attractive valuations and carry a Value Score of A, trading below industry averages.
With shares on an upward trajectory in recent years, GM and Ford present an enticing proposition for investors, given their undervaluation and sound fundamentals. Any dip in stock prices could serve as an opportune moment to fortify investment portfolios.
Both GM and F currently hold a Zacks Rank #3 (Hold), indicating a favorable stance for potential investors.