EV uncertainty, hybrid hype dominate the auto industry’s Q4 reports

Detroit appears to be the winner of the latest round of “Tesla versus the legacy auto industry”—at least according to Wall Street’s reaction to Q4 earnings.

Tesla’s stock sank following the EV maker’s Jan. 24 earnings call, during which executives said they expect a slower pace of growth this year. But investors reacted favorably to the latest results from GM and Ford, even as the automakers also acknowledged a bumpier-than-expected EV transition.

“It’s a tale of two cities,” Dan Ives, managing director and senior equity research analyst at Wedbush Securities, told Tech Brew. “From Detroit, [there were] stronger earnings and overall demand than the Street was fearing, with outlooks that show profitability pictures that are a lot brighter than many on the Street were modeling.”

GM and Ford appear to be “listening to the dealers and customers,” he added. “And you contrast that with Tesla, [which] is going through a little bit of an identity crisis now.”

• Tesla reported net income of $7.9 billion in Q4, CNBC reported, on $25.2 billion in revenue.
• GM posted net income of $2.1 billion on revenue of nearly $43 billion.
• Ford reported a Q4 net loss of $526 million and $46 billion in revenue.

It’s important for Tesla to stick to its projected timeline to start producing a new, sub-$30,000 Model 2 in the latter half of next year, Ives said. In a report, he also called for Tesla to take steps like initiating a share buyback program and halting price cuts so that the company can maintain an advantage it’s long held over competitors that have yet to turn a profit on EVs: healthier margins.

Underscoring the uncertainty around demand for battery-electric vehicles, hybrids were a major theme of the latest industry earnings. Gasoline-electric models are hot right now, as Tech Brew has reported, as consumers, many of whom are still wary about battery range and the steep price tags of some EVs, seek out a middle ground.

Strong hybrid sales helped power Toyota to record profits, the Wall Street Journal reported. The world’s largest automaker reportedly expects its hybrid sales to grow to 5 million units by 2025, up from 3.4 million in 2023.

And in a major turnaround, GM confirmed that it would bring hybrids back to its North American lineup as it works toward a 2035 goal of having a zero-emissions lineup.

“GM remains committed to eliminating tailpipe emissions from our light-duty vehicles by 2035,” CEO Mary Barra told investors. “But in the interim, deploying plug-in technology in strategic segments will deliver some of the environmental benefits of EVs as the nation continues to build its charging infrastructure.”

Wall Street appeared to be pleased by Ford’s announcement that it would pull back on EV investments “until they’re justified by demand and prospects for acceptable returns,” the company said in a press release announcing its Q4 earnings. The automaker’s EV business reported a full-year EBIT loss of $4.7 billion.

Ford, too, seems to be cashing in on the hybrid enthusiasm. CEO Jim Farley said the automaker expects hybrid sales to climb 40% this year after increasing 20% in 2023. He emphasized a “power of choice” strategy that gives consumers ICE, hybrid, and EV versions of popular vehicles like the F-150.

Though Farley said that EVs are “inevitable” in Ford execs’ view, hybrids “will play an increasingly important role in our industry’s transition and will be here for the long run.”

When asked for his impression of Wall Street’s reaction to the industry’s renewed interest in hybrids, Ives said “it’s music to the ears.”