Al Root
Electric vehicles just haven't captured the hearts and minds of American car buyers as quickly as investors and car companies once expected. That has left auto makers with mounting losses and the uneasy feeling they wasted a lot of money.
Investors can expect asset write-downs and new plans from auto makers that leaned a little too hard into the trend. Curiously, that shouldn't be a headwind for their stocks in 2026.
On Monday, Ford Motor surprised investors by announcing a $19.5 billion financial charge related to its EV investments, reflecting the idea that money spent on battery-powered cars won't ever yield an adequate return. Ford typically spends about $9 billion a year on new plants and equipment and another $8 billion on engineering, research, and development.
The charge is a fitting end to the year. If late 2021 or 2022 were the years of EV optimism, 2025 is the year many of those EV hopes were dashed.
Only a few years ago, companies such as Ford and General Motors committed to spending tens of billions developing EVs, partly to chase down Tesla, whose stock gained 50% in 2021 after rising 740% in 2020.
Threats of disruption from start-ups loomed large, too. Rivian completed its blockbuster IPO in November 2021. Shares closed north of $150 on Nov. 16, 2021, valuing the company at north of $150 billion. Ford was valued at less than $80 billion at the time.
Initially, investors loved the spending plans. Ford stock traded north of $25 a share in January 2022. It entered Tuesday below $14.
By 2022, Tesla had almost two-thirds of the U.S. market as EV sales topped 800,000 vehicles, up 66% year over year. Ford was making headway, though. Its EV sales rose 126%, propelled by strong initial demand for the Mustang Mach-E and F-150 Lightning.
This year has been different. EV sales were roughly flat in the first two quarters, before getting a third-quarter boost with buyers rushing to beat the expiration of the $7,500 federal purchase tax credit, eliminated by President Donald Trump's tax and spending bill passed on July 4.
EVs, however, probably aren't responsible for most of the decline. Instead, quality issues have weighed on profits and investor sentiment. GM leaned just as hard, or harder, into the EV trend. Its shares were north of $60 in early 2022. They have done fine since then, entering Tuesday above $80.
What's more, Chrysler-parent Stellantis and Toyota Motor both opted to play the role of fast follower, which looks like a good decision now. Stellantis stock, however, has been cut in half since early 2022. Toyota's U.S.-listed shares are roughly flat.
That should give investors some comfort that any EV charges can be absorbed by the market, as long as the underlying car business is in good shape.
Citi analyst Mike Ward praised Ford's actions, calling them proactive in a Monday report.
"GM took a $1.6 billion charge in 3Q and expects a larger charge in 4Q related to battery-electric vehicle realignment," he added.
Despite a potential charge from GM, Ward prefers its stock to Ford's. He rates Ford stock Hold and has a $13.50 price target for shares. He rates GM shares Buy and has an $86 price target for the stock.
One reason for the ratings is the relative profit margin. GM is expected to generate an operating profit margin of about 7% in 2025. Ford's will be closer to 4%.
But what about hybrids? It appears there is more room for Ford and Toyota hybrids, which could create a headwind for GM sales. To be sure, that's a risk, but GM will have hybrids for sale in the U.S. by 2027, the same year Ford will launch an affordable midsize all-electric truck.
Understanding the product lineup is essential. But the EV history shows understanding profits probably matters more.
Write to Al Root at allen.root@dowjones.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
December 16, 2025 16:53 ET (21:53 GMT)
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