Tesla remains top of the heap in electric vehicle (EV) sales, but there was a bit of a change in the race of competitors trying to catch the leader in the U.S. market.
While Ford Motor Company (NYSE: F) finished as the No. 2 seller of EVs in the U.S. last year, the first quarter of 2023 proved to be a shakeup in the race with General Motors (NYSE: GM) jumping ahead of its crosstown rival by a surprising amount.
By the numbers
There’s no real loser as both Detroit competitors accelerate their EV programs, but after Ford secured the second place podium in 2022, GM took that spot and trounced its rival in sales by nearly two to one during Q1.
More specifically, GM’s first-quarter EV sales hit 20,670 units in the U.S. market, well ahead of Ford’s 10,866 units. Again, to be fair, Ford’s EV sales during Q1 were still up a significant 41% compared to the prior year.
The questions are: What drove this shakeup, and what is Ford doing to catch up?
A closer look
If Ford is to end up No. 2 in EV sales when 2023 is all said and done, it will need to crank up production of the Mustang Mach-E, the F-150 Lightning electric pickup, and the E-Transit electric full-size van. The good news is that boosting production is exactly the plan, but it also comes at a temporary cost.
Last year Ford added thousands of workers in Dearborn, Michigan and in Mexico to help boost output of its F-150 Lightning and Mustang Mach-E, respectively. However, the changes required to boost output at the Mexico plant forced plant downtime and largely caused a nearly 20% slowdown in Q1 Mustang Mach-E sales.
Ford is planning to add a third crew to its Kansas City assembly plant this month to boost production of its E-Transit vans, and if there’s notable downtime, the effect of that is yet to be felt. Ford is aiming for an annual run rate of 150,000 F-150 Lightning units and 210,000 Mustang Mach-E units by year-end.
Accelerating production is incredibly important, because while the race to try to dethrone Tesla as leader of EV sales is a goal, getting to profitability is arguably far more important.
Ford is spending a staggering $50 billion to develop and produce its lineup of EVs through 2026, and as it currently lacks scale, it expects to lose roughly $3 billion on its EVs this year alone.
On the flip side
GM is also eyeing a breakout year for its lineup of EVs, which is slated for a busy launch season — more on that in a second. Already in the first quarter GM gained market share and is scaling production of its Ultium Platform, which will eventually lead to margin gains, and topped 20,000 EVs sold in a quarter for the first time. The sales jump was driven largely by record quarterly sales of the Chevy Bolt EV and EUV.
Its Chevrolet Silverado EV work truck will begin deliveries late this spring, and it’s already building and shipping the Hummer EV pickup and SUV versions. Cadillac LYRIQ deliveries are expected to increase quickly during the remainder of 2023, and the Chevrolet Bolt EV and EUV will reach 70,000 units in production to fill demand.
Investors can expect the automaker to roll out the Chevrolet Blazer and Equinox EV during the second half of the year, and even a Corvette E-Ray late in the year.
GM plans to produce 50,000 EVs during the second quarter, and double that production rate during the second half of the year.
Is GM a buy?
EVs will soon play a large role in whether or not automakers are a worthy investment. A key race between these two Detroit automakers will be the one to overall EV profitability, and as it stands now, General Motors expects its lineup of EVs to be profitable by 2025.
Ford appears to be roughly a year behind. It expects to be profitable by 2026. Through cost reductions and accelerating scale, among other factors, it hopes to reach an 8% EBIT margin by the end of 2026.
There are many reasons GM appears to be a solid buy in 2023, including its surging BrightDrop and Cruise businesses, which focus on solutions for consumer delivery and autonomous driving, respectively. GM’s cash flow and earnings have been impressive, and there’s potential for management to increase its dividend, which currently stands at a modest 1% yield.
When 2023 is said and done, don’t be surprised if GM has emerged as the primary competitor to Tesla in U.S. EV sales, and that would be one more reason the stock is a buy.
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Daniel Miller has positions in Ford Motor Company and General Motors. The Motley Fool has positions in and recommends Tesla. The Motley Fool recommends General Motors and recommends the following options: long January 2025 $25 calls on General Motors. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
