The outlook for the U.S. auto industry is getting worse because of China competition and worsening conditions at home, which could put pressure on shares of Ford Motor and General Motors , according to Morgan Stanley's Adam Jonas.
The widely followed analyst downgraded Ford to equal weight from overweight. He also trimmed his price target to $12 from $16, implying upside of 10.4%.
GM was lowered to underweight from equal weight, with the price target cut to $42 from $47. The new forecast signals 12.6% downside from Tuesday's close.
Additionally, Jonas lowered his rating on EV maker Rivian to equal weight from overweight, cutting his price target to $13 from $16. The new forecast implies upside of just under 10%. The analyst believes China taking market share globally will weigh on the U.
S. auto sector, along with rising car inventories, low affordability and deteriorating credit at home. "The China capacity 'butterfly' has emerged and is flapping its wings.
China produces 9mm more cars than it buys, upsetting the competitive balance in the West," said Jonas. "Even if these units don't end up directly on US shores, the 'fungibility' of lost share and profit by key US players adds pressure here at home." Shares of Ford were down 2% in the premarket, while GM shed 3.
6%. Rivian was off by 4%. F GM 5D mountain F and GM fall Ford Motor shares have struggled in 2024, losing more than 10%.
Jonas thinks the company will see "increased pressure on margins across all segments, from Chin.