What happened
Ford Motor Company (NYSE: F) and General Motors (NYSE: GM) have been trying hard to get people to think of them more and more as viable competitors in the electric vehicle market. The problem for shareholders is that investors have been treating them that way so far in 2022. Along with many pure-play electric vehicle names, the stocks of Ford and GM have plunged 19% and 28%, respectively, year to date.
That's not as bad as shares of some start-ups including Lordstown Motors (NASDAQ: RIDE), which has its own company-specific issues. But shares of all three had similar returns last month. The stocks of Ford, GM, and Lordstown were down 13.5%, 11.4%, and 14.3% (respectively) in February, according to data provided by S&P Global Market Intelligence.
A generator from a Ford F-150 Lightning charging a Mustang Mach-E. Image source: Ford Motor Company.
So what
Each of these automakers reported fourth-quarter and full-year 2021 results over the course of February. And the news wasn't at all bad for Ford and GM. Ford increased full-year 2021 revenue by 7%, and swung back to profitability compared to a pandemic-impacted 2020. GM also grew revenue and profits in 2021, but forecast profits to be relatively flat for 2022. But investors are focusing on both companies' transitions to electric vehicles, as many new models are on the verge of launching.
Now what
Ford plans to be aggressive in its move to EVs. The company said it wants to double its global EV manufacturing capacity, to more than 600,000 units per year, by 2023. By 2030, it aims to have fully electric vehicles account for at least 40% of its product mix. Ford announced it will restructure the company to separate its electric and internal combustion businesses.
While many on Wall Street praised the plan and the visibility investors will have into each specific division, some were skeptical of Ford's announced profitability goals. The company said it not only plans to be producing 2 million EVs per year by 2026, but it also expects its operating profit margin to increase to 10% by that time. That would represent an increase of 270 basis points over 2021.
GM has expressed similar optimism for its EV business, but widely followed Morgan Stanley analyst Adam Jonas is skeptical that the legacy automakers can achieve their goals. He believes they will face supply-chain challenges, including accessing enough raw material. Jonas said he wouldn't expect Ford to make even half its EV production and operating profit margin goals by 2026.
Start-ups like Lordstown face different types of challenges. With Lordstown's stock down almost 90% in the last year, many investors lack confidence that the company will even survive, let alone thrive.
Right now, these stocks aren't in favor with investors for various reasons, and the February drop has continued into March. Market sentiment about the established automakers isn't showing much hope that a name like Ford can reinvent itself as an EV company, leading to the recent declines.
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