Shares of Ford Motor and General Motors fell about 5% on Wednesday after Morgan Stanley analysts downgraded the U.S. automakers, citing a challenging market environment marked by falling prices and growing competitive threats, particularly from China.
Legacy U.S. automakers are faced with high inventories, falling prices, and signs of weakening consumer demand even as car manufacturers from Japan and South Korea, as well as electric vehicle makers, increasingly gain market share, Morgan Stanley analysts led by Adam Jonas said in an investor note.
Competitive pressure from China, which produces 9 million more cars than it buys, is also weighing on U.S. car makers, the analysts said.
Ford was downgraded to “equal weight” from “overweight”, while its price target was cut to USD 12 from USD 16. Its shares were down more than 4% at USD 10.43, on track for the biggest daily percentage decline since early August. General Motors was downgraded to “underweight” from “equal weight” and its price target cut to USD 42 from USD 47. Its stock fell 5.4% to USD 45.50, making it the biggest daily percentage decline since early September.
EV maker Rivian Automotive and Canadian parts manufacturer Magna International were both downgraded to “equal weight” from “overweight.” Shares of Rivian were down 5.7% while Magna’s were off 4.7%.
However, several car retailers and dealerships, including Penske Automotive, Asbury Automotive and Sonic Automotive, were upgraded by Morgan Stanley.
Unlike car manufacturers, the dealerships have favorable consumer and brand exposure, are insulated from Chinese competition, and generate recurring profits from servicing vehicles and selling parts. Shares of Penske were up 0.5%, Asbury gained 2%, and Sonic added 0.3%.
