Ford vs. General Motors: Which Stock Is a Better EV Play?
The age-old rivalry between the Detroit-based automakers continues. As the age of electric vehicles begins, is Ford or General Motors a better buy?
It’s one of the biggest rivalries in history. Microsoft vs. Apple… Coke vs. Pepsi… Alien vs. Predator… Ford (F) vs. General Motors (GM).
For more than 100 years, the two Detroit-based automakers have duked it out. After all, General Motors was founded explicitly to compete with the release of Henry Ford’s Model T in 1908.
Fast-forward to 2022, and the market for electric vehicles (EVs) is growing. Spurred on by worries about climate control, consumers are beginning to choose battery-powered cars over gas-guzzlers.
Both Ford and General Motors have aggressive plans to boost EV production in coming years and compete with EV-focused companies like Tesla (TSLA). The market has rewarded these efforts with soaring shares.
So which company is the better buy? Let’s pit these Motor City megaliths against each other and see which one belongs in your portfolio.
At a Glance: Ford vs. General Motors
Ford Motor Co.
General Motors Co.
Automobiles and commercial vehicles
Automobiles and commercial vehicles
Market Cap (1/14/22)
Why Invest in Ford or General Motors?
The electric vehicle market is steadily growing and should experience serious gains in the coming years.
Although the United States has been slow to embrace the EV trend, other countries around the world — particularly European countries and China — have seen exponential EV growth. In 2020, more than 10 million EVs were on the road.
Also in 2020, the global EV market size was $246.7 billion. But that’s expected to grow to $1.3 trillion in 2028, at a compound annual growth rate (CAGR) of 24.3%.
Here in the U.S., the Biden White House has been pushing for improved EV infrastructure.
One of the biggest roadblocks to owning an EV is the inconvenience of finding a charging station. So the $7.5 billion Biden has allocated to building out a network of EV chargers is good news for the American EV market.
The super-obvious way to play the growing EV trend is by buying the stocks of pure-play EV companies, such as Tesla, Lucid (LCID), or Rivian (RIVN). But these stocks can be relatively risky.
That’s because they’re valued more like tech stocks — with investors betting on their technology — rather than traditional carmakers, which the market values based on their actual products.
On the other hand, Ford and General Motors have century-long histories of blockbuster products and solid businesses. They’re not risky growth stocks, but classic long-term holds.
And because they’re massive, with millions of cars already on the road, they’re not dependent solely on their EV sales.
There’s another thing Ford and General Motors have in their favor: The EVs that they’ve released or are planning to release are more budget-friendly than the luxury models put out by many pure-play EV makers.
They’re also the type of vehicles that appeal to everyday Americans — think pickup trucks, SUVs, and cargo vans.
Should You Invest in Ford?
Ford is arguably the most famous car maker in the world. Founded by visionary entrepreneur Henry Ford, the company pioneered interchangeable parts and the assembly line to make the first cars affordable to everyday people.
Along with its namesake car brand, Ford owns Troller, a Brazilian SUV brand, and stakes in Aston Martin and Jiangling Motors.
Ford’s F-Series is the best-selling line of vehicles in the United States. In 2021, the company sold 726,400 F-Series models.
So it’s no surprise that one of the country’s most eagerly awaited EVs is an all-electric pickup, the Ford F-150 Lightning EV. Having received 200,000 reservations for the truck, Ford had to stop accepting them. The Lightning is due out this spring.
But that’s not the only EV Ford has up its sleeve. The automaker has already rolled out the Mustang Mach-E crossover and the E-Transit-350 Cargo van.
In mid-January, Ford’s market capitalization passed $100 billion for the first time in the carmaker’s long history. That makes the company worth more than GM, as well as many pure-play EV companies, such as Rivian. (However, Tesla is currently the highest-valued car company by market cap.)
The company struggled in the first half of 2021, thanks to the global computer chip shortage caused by COVID. That shows up as a 7% year-over-year decrease for all of the fiscal year.
But as Ford was able to increase its ship supply, sales increased. In fact, in the fourth quarter, Ford sold more than half-a-million vehicles.
In 2021, Ford shares saw a 140% gain. However, the stock might currently be a little overvalued. The median Wall Street consensus 12-month target price for the stock is $23, which would be a downside of nearly 9%.
Still, Ford is a fantastic legacy company. Investors should wait for dips to levels in the low $20s and hold on for the long run.
Should You Invest in General Motors?
General Motors is the largest car company in the U.S. Although GM was founded in direct response to Ford, it’s grown into more than just a “spite company.”
GM’s massive success has been due largely to its owning a varied portfolio of car brands. Currently, the company owns Buick, Cadillac, Chevrolet, and GMC.
In 1996, GM became the first major automaker to release a mass-produced, purpose-designed electric vehicle, the General Motors EV1.
Unfortunately, the EV1 didn’t prove profitable for the company. Despite customer protests, all EV1s were taken back by the company, and many were destroyed.
Luckily, GM eventually went back to the drawing board and rolled out the Chevy Bolt EV. Bolt sales began in 2017.
GM plans to start delivering GMC Hummer EVs this year, followed by the Chevrolet Silverado EV in spring 2023.
General Motors has been hard hit by the computer chip shortage. Its sales decreased by 13% in 2021.
And although it outperformed the S&P 500, compared to Ford, GM’s 2021 stock performance was relatively flat — 38%.
However, General Motors is betting on its future growth. By 2030, the company aims to double its revenue. GM hopes to do this by bringing out 30 new electric vehicle models by 2025. That’s quite an ambitious goal!
GM shares are currently priced around $61. But the consensus median 12-month price target for the stock is $74. That would be an upside of more than 21%.
I think General Motors — and its investors — will profit from the EV market. However, the company’s EV story is lagging behind Ford’s.
General Motors is a great buy now. Grab some shares to hold for the long term, as well as some you can potentially sell for a profit next year.
Ford vs. General Motors: Which Is a Better Buy?
Both Detroit-based carmakers are great. I would invest in either of them sooner than I would plunk my cash into Tesla, Lucid, or Rivian.
That said, I would wait for Ford to come off its recent record highs before buying. If you want an EV-exposed stock to buy today, General Motors should fit the bill.
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