Gas is becoming more expensive, tariffs threaten to raise automotive prices and driverless cars are becoming a reality sooner than we thought. Yet, amid fears of continued downturn in the automotive industry, General Motors (GM, Financial) and Ford (F, Financial) both reported strong sales in May, positioning stock prices to rise once more.
Ford sales increased 0.7% in May, selling close to 243,000 vehicles. This was spurred by strong truck sales, which rose by 9.4%. Unfortunately for Ford and many other auto manufacturers, sedans and cars saw a stupendous drop.
While much of this could be attributed to Memorial Day sales and the start of spring, there’s more to this story than meets the eye.
While GM does not report monthly figures anymore, sources close to Bloomberg told the company that sales grew by over 12% in May. More good news came for investors as Cadillac announced last week that it would bring semi-autonomous autopilot to all of its vehicles by 2020 and that GM would soon follow suit on all other models.
Although Ford shares have plunged by 2.6% year to date, a strong sale report in May supports an optimistic outlook for Ford, although time will tell. Seasonally adjusted annual rate estimates are still in line with Ford’s own estimate, promising more stability to a company that some deem "overvalued."
But what is truly giving investors hope is the future. While many have purported that Ford prices would plunge or contract this year, we still haven’t seen this fully develop. Both GM and Ford’s development of electric vehicles and autonomous vehicles have given investors something to talk about.
Ford is already bringing autonomous vehicles to Miami, which it plans to unveil for the entire country by 2021. GM recently received a $3 billion investment from Softbank (TSE:9984, Financial), who also owns a significant stake in Uber.
While Ford and GM stocks may dip a little this year, we will not see a bearish selloff by any means. Rather, these companies will be able to make up these losses within the next year or two, depending on how the global economy and trade policies affect auto sales.
As some investors view Tesla (TSLA, Financial) as being overvalued and even a little unreliable, traditional automakers like Ford and GM are providing their inventors with greater confidence. After a strong uptick in prices this week, Ford and GM have positioned themselves to become leaders in the next technological wave of electric and autonomous vehicles, giving a more promising outlook to their stocks this year than expected.
