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GM, Ford must convince investors that they can profit when prices fall

DETROIT — common engine and Ford is expected to report strong profits for 2022 next week, supported by high prices pickup truck and sport utility vehicle.

Now, Detroit rivals must convince investors that last year’s profit formula can continue to work as the cost of electric vehicles the battery is rising, high interest rates are curtailing consumer purchasing power, and Tesla are discounting.

There are already signs that automakers in Detroit are cutting spending to offset competitive and economic pressures. GM has shelved plans to build a fourth EV battery factory in North America.

Ford is negotiating with German unions to cut thousands of jobs in European operations and may sell a German vehicle assembly plant. In October, it stop sponsoring self-driving car Argo AI branch.

GM and Ford both rely on U.S. sales of pickup trucks and SUVs for the bulk of their global profits. This year, both automakers plan to increase sales much less profitably tram in North America and other markets.

Risks to Detroit automakers’ profits will be a challenge in the best of times. But now, GM and Ford must account for forecasts of a slowdown, even a recession, in the US economy.

EV battery raw material costs are on the rise, but US EV market leader Tesla is slashing prices on its best-selling product 3 . sample and Model Y vehicles up to 20%.

Model Y SUV competes with Ford Mustang Mach-EGM’s Cadillac Lyriq EV and with the internal combustion SUVs that Detroit automakers sell.

Morgan Stanley estimates the price increase has added an average of $3 billion per year to Ford’s pre-tax profit and equates to more than 200% of the company’s pre-tax profit improvement for 2022.

1 U.S. automaker by sales in 2022, said higher prices added $2.1 billion to pre-tax profit in the third quarter year-over-year. 2021 — equivalent to almost half of pre-tax profits for the entire period.

The company has told investors that it will spend 35 billion USD on electric and autonomous vehicles between 2020 and 2025. Ford has put its planned EV investments in $50 billion by 2026.

“If we are entering a recession, what steps can they take to stay invested and stay strong?” said Morgan Stanley analyst Adam Jonas.

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