Major U.S. automakers saw their shares downgraded on Thursday as banks warned of higher costs and lower demand brought on by Donald Trump’s trade war.
UBS Group AG cut its recommendation on shares of General Motors Co. to neutral from buy, citing the possibility that tariffs will raise prices and disrupt production. Goldman Sachs Group Inc. made the same change for Ford Motor Co. as it lowered its outlook for U.S. auto sales and global production.
“We see the potential for a new era for US autos emerging with sustainably lower volumes and higher cost to produce a vehicle,” UBS analyst Joseph Spak wrote in a note to clients. “While many names appear washed out, we are not confident enough to recommend them as absolute buys, as we candidly are not quite sure what future earnings you are buying.”
GM shares are down 18% year-to-date, while Ford has slid 8.1%. Both stocks declined alongside broader markets Thursday as traders turned their attention back to the economic impact of Trump’s trade war.
As 25% U.S. tariffs on imported vehicles went into effect last week, the effects were quickly felt across the sector. GM announced plans to boost U.S. pickup truck output, while Ford started offering steep discounts to keep customers coming to showrooms.
In the wider industry, Jeep maker Stellantis NV is temporarily halting some production in Canada and Mexico, while Audi owner Volkswagen AG plans to add import fees to the vehicles it ships into the U.S. Used-car retailer CarMax Inc. on Thursday backed away from the timing of its financial goals, citing “the potential impact of broader macro factors.”
Beyond the direct effect of sector tariffs, trade and economic policy could impact consumers and hit demand, Spak said. Goldman analyst Mark Delaney also noted “a more difficult macroeconomic environment” ahead. Both analysts made their rating changes despite Trump’s decision to delay some country-level duties.
While UBS and Goldman analysts acknowledged that their outlooks are uncertain, they expect tariffs on the industry are here to stay.
“The auto tariffs are sector specific, not subject to individual country trade negotiations,” Spak wrote. “In our view, they are likely to remain for the foreseeable future.”
Matthew Griffin, Bloomberg News
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