Morgan Stanley downgrades US auto stocks, General Motors and Ford shares fall more than 5% at one point

Morgan Stanley is bearish on US auto stocks and has downgraded the ratings of "American car companies" General Motors, Ford, Rivian, and other car companies across the board.

As a result, US auto stocks came under pressure on Wednesday, with General Motors' US stocks falling more than 6.4% at one point during the morning session, Ford falling more than 5%, while Tesla's stock price rose more than 1% at one point.

On Wednesday, September 25th, Eastern Time, Morgan Stanley analyst Adam Jonas released a report downgrading the ratings of US auto stocks. Jonas wrote at the beginning of the report:

"We are downgrading our rating on the US auto industry from 'attractive' to 'in line with expectations.' Overall, our rating downgrade is based on a variety of factors including international, domestic, and strategic considerations, which we believe investors may not fully appreciate."

Jonas pointed out in the report that this rating downgrade is based on a comprehensive consideration of a series of domestic and international factors, including intensifying price wars, market share squeeze, insufficient consumer purchasing power, and rising credit default rates. He emphasized that these factors are gradually eroding the profits of American car companies.

The average transaction price of US cars has reached near historical highs, putting pressure on consumers. Despite a slight decrease in interest rates, the average monthly car payment in the US has exceeded $700, making consumers more hesitant when purchasing cars.

Average monthly repayment amount (USD/month) near historical highs

Furthermore, for consumers with lower credit scores, the credit default rate continues to rise, meaning they are finding it increasingly difficult to afford the cost of buying a car. Data from auto asset-backed securities (ABS) shows that more and more consumers are delaying repayments for longer periods and with greater severity, further impacting car sales.

In the international market, overseas electric vehicle brands are gradually eating into the market share of Western traditional car manufacturers by offering affordable, diverse, and high-quality products. Intensified competition from Japanese, Korean, and electric vehicle (EV) brands has put multiple pressures on US manufacturers, including price declines, weakened product portfolios, rising costs, and shrinking market share.

Jonas also mentioned capital discipline and regulatory risks. While the industry had expected industry consolidation and M&A activities, these expectations have not materialized. At the same time, in order to meet strict carbon dioxide emission standards, compliance risks are continuously rising, posing new challenges for companies.

Compliance risk is becoming a key topic for EU original equipment manufacturers In the field of Advanced Driver Assistance Systems (ADAS) and Autonomous Vehicles (AV), the capital intensity required for competition is often overlooked by many. With the rise of Artificial Intelligence (AI) and data themes in the automotive industry, automakers need to invest billions of dollars in proprietary AI models. Jonas has questioned the financial capabilities of many traditional automakers to make these investments.

Morgan Stanley downgraded Ford Motor's rating from "Overweight" to "Equal-weight" in their report, with a target price set at $12. At the same time, they downgraded General Motors Company's rating from "Equal-weight" to "Underweight".

Summary of Rating Changes