Detroit Automakers Face Headwinds as EV Push Stalls and Cyberattack Disrupts Sales

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The outlook for General Motors (GM) and Ford appears less than stellar as they prepare to report their second-quarter earnings this week. A combination of factors, including a slowdown in electric vehicle (EV) sales growth and a recent cyberattack, are expected to dampen profits for both companies.

Missed Profit Targets and Cyber Disruption

Analysts predict a 7.7% decline in net income for GM and a 10% drop for Ford compared to the same period last year. These downward revisions come amid broader industry challenges. A cyberattack in June targeted CDK, a critical software provider for car dealerships across the United States. This attack forced CDK to shut down a key system used by over 15,000 dealerships, significantly disrupting sales during a crucial month for the industry. Consultancy firm Anderson Economic Group estimates that dealerships collectively lost around $1 billion due to the outage.

EV Growth Slowdown Dampens Profitability Ambitions

Beyond the immediate impact of the cyberattack, the automakers are grappling with a slower-than-anticipated rise in EV sales. This sluggish growth makes it difficult for companies like GM and Ford to achieve the production volumes needed to drive down costs and reach profitability sooner. Sam Fiorani, vice president at research firm AutoForecast Solutions, points out that established manufacturers face inherent challenges compared to startups when it comes to profitability in the EV space. Unlike startups with a clean slate, traditional automakers need to make significant investments in vehicle design and manufacturing facilities, delaying their path to profitability.

Intensifying Competition Erodes Market Share

Adding to their woes, American automakers are facing fierce competition from established players like Tesla (TSLA.O) and a surge of Chinese EV manufacturers. This fierce competition has triggered a global price war, further squeezing profit margins for GM and Ford.

Shifting Plans and Investor Concerns

Recent actions by both companies raise concerns about their EV strategies. Last week, GM backtracked on its previously announced forecast of reaching one million units of EV production capacity in North America by the end of 2025. Similarly, Ford reallocated a Canadian plant earmarked for future EVs to build gasoline-powered versions of its popular F-Series pickup truck. Additionally, Ford has delayed the launch of its new three-row EVs by two years. These strategic shifts, coupled with the slower sales growth reported earlier this month, paint a picture of an industry in flux.

Investor Focus and Looking Ahead

Despite the current challenges, analysts at Evercore ISI remain cautiously optimistic about GM’s prospects compared to Ford. They anticipate that GM might provide guidance towards the higher end of their previously announced full-year forecast. As the earnings reports unfold, investors will be keenly looking for details on the automakers’ revised EV plans, their perspectives on consumer demand, and the long-term impact of the CDK cyberattack. The coming weeks will be crucial for GM and Ford to regain investor confidence and navigate the increasingly competitive EV landscape.