Wall Street analysts on Monday said pre-buying cars ahead of tariffs will provide a temporary lift to US carmakers like Ford and GM, however, the long-term picture remains clouded by rising costs and weakening demand across the automotive value chain.
Deutsche Bank’s Edison Yu took a hard look at the sector on Monday, revising his expectations for General Motors and Ford Motor as first-quarter earnings approach.
Yu acknowledged that pre-buying by dealers, aiming to get ahead of the new tariff regime, will help both automakers start the year on firmer footing.
The early part of 2025 will benefit from “pre-buying,” Yu wrote.
Both GM and Ford primarily sell vehicles to dealers, who then sell to consumers, giving manufacturers a near-term lift as inventories are built up.
Mounting costs threaten automaker profits
However, beyond the initial wave of pre-buying, Yu sees significant pain ahead.
He estimates that tariffs could slash between $4 billion and $7 billion annually from the profits of both GM and Ford.
To put that in context, Ford reported over $10 billion in operating profit last year, while GM posted nearly $15 billion.
“We don’t expect [auto makers] to bear the full burden of these extra costs as consumers and dealers will take some of the hit,” wrote Yu.
Automakers are expected to explore mitigation strategies such as adding production shifts at US plants and negotiating with suppliers to share the burden.
Still, Yu is not optimistic about the outlook, remarking that the administration’s commitment to auto tariffs appears entrenched.
“While the Trump administration appears flexible on broader ‘reciprocal’ tariffs, the auto tariffs appear stickier,” wrote Yu.
“Our assumption is they won’t go away, representing a cornerstone in America’s new industrial policy that demands onshoring.”
Analysts slash price targets as investor caution grows
Reflecting these risks, Yu lowered his price target for Ford to $7 from $9 per share, maintaining a Hold rating.
He also downgraded GM from Buy to Hold, slashing the price target to $43 from $58.
Shares of GM edged up 0.4% in morning trading to $43.81, while Ford slipped 0.1% to $9.32.
Both stocks have lagged since the US election, with Ford down 12% and GM off 19%.
Since Trump’s tariff announcement on April 2, the average analyst price target for Ford has slipped to around $9.40, down from nearly $10 earlier this month, according to FactSet.
That compares with almost $14 a share a year ago.
For GM, the average price target has fallen to about $56, from close to $61 previously.
A year ago, analysts were targeting roughly $51, but billions of dollars in share buybacks have helped lift both the stock and price targets since then.
Currently, around 54% of analysts covering GM rate the stock a Buy, roughly in line with the 55% average Buy rating across the S&P 500.
By contrast, only about 20% of analysts recommend buying Ford shares.
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