The fortunes of the auto industry revolved largely around Trump this year. That applies especially to Detroit. After taking an initial salvo from the president’s haphazard trade war, General Motors Co. and Ford Motor Co. rallied on his subsequent carve outs and war on fuel economy and electric vehicles. Both should beat the S&P 500 Index handily for the first time in four years.
So Detroit enters 2026 on a roll. Tariff headwinds have abated somewhat and US vehicle sales are expected to be stable. Washington’s swing back toward internal combustion engines also offers opportunities to raise margins.
And yet, in relative terms, Ford and GM look as unloved as ever.
Detroit’s safe space involves selling ever more big, tricked-out vehicles sporting engines without worrying about environmental penalties or interlopers. That is kind of where they are now, shielded by anti-green and pro-protectionist policy. Can it last? Judging by Ford’s and GM’s single-digit earnings multiples, investors regard this happy state as finite — and with good reason.
The most dangerous time for an incumbent is when their business is doing well, eclipsing signs of disruption gathering around them. In autos, that takes several forms. China’s automakers are squeezing foreign peers out of their own market and now making inroads everywhere else that lacks sky-high trade barriers. Linked to that, EVs are getting cheaper and better and taking market share in many countries outside the US. Technology is also changing how vehicles get made, sold and used, with batteries, robotics, artificial intelligence and the related field of automated driving at the leading edge.
Disruption can be hard to spot in real time and you can lose a lot of money (and face) if you leap too soon. It takes a lot to upend a century-plus-old industry making products that are deeply embedded in daily life and which turn over at a stately pace of once every two decades. With China in mind, prior panics about Japanese and Korean rivals conquering America eventually subsided as Detroit found a new equilibrium. Similarly, the burgeoning s-curve in US EV sales has rapidly collapsed into more like an ‘A’, as inherent challenges around cost, consumer behavior and charging infrastructure have been compounded by Republicans’ repeal of incentives.
Yet look around. Waymo robotaxis ferrying passengers around multiple cities. A Chinese smartphone company suddenly building EVs that have Ford Chief Executive Jim Farley worried. Sales of new passenger vehicles with only internal combustion engines falling globally by more than a quarter between 2019 and 2024 — that’s 20 million units, bigger than the entire US market. To dismiss disruption altogether would be derelict.
And disruption costs. Citing prior revolutions, including the arrival of mass-produced cars a hundred-odd years ago, John Casesa, former strategy head at Ford and now a senior managing director at Guggenheim Securities, points to capital as the decisive edge.
“The industry’s new entrants are investing at a scale that matches or exceeds the largest incumbents,” he says, “and many of these challengers are building scale in technologies that underpin the future automobile: batteries, chips, and software.”
This is where Ford’s and GM’s discount hurts, facing competitors with far easier access to capital. Tesla is the extreme example of this, valued at $1.6 trillion — roughly 12 times Ford and GM combined — or 242 times forward earnings. Tesla’s multiple is a little like my young son’s obsession with the band Imagine Dragons: I can’t say I agree with it, nor expect it to last, but it is undeniably there and both have real world effects, on the autos arms race and my Spotify algorithm, respectively. Tesla isn’t the only one enjoying an easier relationship with investors, either.
Besides cost of capital, and linked to that, is the traditional mismatch of old dogs with new tricks. Detroit is blocking and tackling well in the current environment, leaning into their core domestic truck businesses and working to address problem areas, China in GM’s case and Europe in Ford’s. But both have struggled with innovation of late.
Recall that the recovery in GM’s share price over the past two years began with it deploying that old standby of mature companies, a stock buyback, after a multi-billion-dollar debacle with robotaxi-developer Cruise. Similarly, Ford abandoned its own self-driving effort with Argo and lost billions developing EVs; it closed out 2025 with a hard pivot away from the latter. Ford’s touted ‘Model T’ effort to launch a new, lower cost electric truck is intriguing, continuing a long tradition of reinventing itself around one new vehicle, be it Henry Ford’s Model A in 1927, the Taurus of the 1980s, and former chief executive, and savior, Alan Mulally’s global Ford Focus after the 2008 financial crisis. But using a skunkworks in California to do so can be read as both a clever way of bestowing freedom to break the mold and an admission that the mold in Michigan is unhelpfully sturdy.
In a recent report, analysts at Gartner Inc. predicted both a technological shake-up across autos and a failure by most to fully exploit it.
Only 5% of companies are expected to maintain investment in AI as a priority through the end of the decade. Meanwhile, connected services, lauded as a way to tap new revenue from drivers, will disappoint such expectations as they become standard features (see BYD Co. Ltd.’s ‘God’s Eye’ driver assistance system). One of the authors, Pedro Pacheco, highlights the difficulty of keeping budgets dedicated to disruptive business cases such as AI or autonomy, where “you cannot really prove it; you can only tell a story that is convincing.” He adds that, for the average legacy automaker, “even if they invest, they will get to a point where they say ‘we tried.’”
For next year, and a majority of the rest of the decade, Ford and GM should enjoy the grace and favor of the White House, capricious as it is. Much depends on whether they use that brief period to settle back or strike ahead.More From Bloomberg Opinion:
- How Toyota Bucked the Trend in China: Juliana Liu
- Trump Wants Americans to Buy Tiny Cars. Good Luck: Liam Denning
- Musk’s $140 Million Fine Shows EU Losing Its Nerve: Parmy Olson
This article has been picked from a syndicate wire feed.
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First Published Date: 24 Dec 2025, 06:39 am IST
