Ford and other carmakers could lose half their profits next year

UBS Group AG analysts concluded this Monday that profits of automakers in America and Europe will halve due to the fact that supply exceeds demand, thereby creating an excess. Joseph Spak, an analyst at RBC Capital Markets, in his turn, gives a more negative outlook for this sector's profits next year.

The industry is struggling, with supply chain problems, rising production costs, and many consumers not being able to afford cars. The difficulties are reflected in stocks; Ford and GM have seen their shares fall more than 45% this year. Monday was marked by more declines. Ford stock fell more than 5% to $11.36, while GM stock fell more than 3% to $32.29.

UBS analysts emphasize that the fall in demand is no longer a myth, it is rapidly gaining momentum. In this regard, they downgraded the shares of Volkswagen AG, General Motors Co. and Renault SA to neutral, and the shares of Ford Motor Co. they advised to sell. Moreover, they also noted that the excess of cars is a matter of time.

Despite the fact that Tesla's third-quarter deliveries didn’t match analysts' forecasts, analysts themselves again give a positive outlook. UBS believes that a policy of lower prices and cost controls will help the company maintain growth, while RBC believes Tesla has established itself as a low-cost supplier of electric vehicles.

In general, analysts give a positive outlook for the industry, and also believe that in the third quarter, many manufacturers will show good results. For example, Mercedes-Benz Group AG is expected to increase margins. Although according to forecasts, the profits of VW, BMW AG and Ford will reduce.

UBS and RBC analysts noted that future news will focus on late year events and the outlook for 2023. Analysts also tend to believe that investors may overlook positive industry news because their attention is focused on the difficulties the industry is experiencing.