### Detroit Giants Brace for Challenging Earnings Amid EV and Pricing Concerns

General Motors (GM) and Ford Motor (F) are poised to face skepticism from investors as they prepare to release their quarterly earnings. Both automakers will need to demonstrate that their pricing power for gasoline vehicles remains robust and that losses from electric vehicle (EV) operations are decreasing. GM is slated to announce its results for the July to September period on October 22, while Ford's report is expected on October 28.

Earlier this month, GM CEO Mary Barra assured stakeholders that profit margins on traditional gas-powered vehicles had not yet peaked, and that EV sales were on the rise. This confidence has helped GM shares climb by more than a third this year, buoyed by strong sales of gas-powered models and two upward revisions of its annual profit forecast. In stark contrast, Ford has grappled with quality issues and billion-dollar losses on its EV ventures, driving its shares down by 8% this year.

Analysts from Deutsche Bank have hinted at potential shortfalls for Ford in the upcoming quarter, citing inflated inventories as a particular concern. Wall Street has been wary for months, questioning whether consumers will continue to pay premium prices for trucks and SUVs amidst high interest rates and broader economic uncertainties. Recent data indicates mixed signals, showing a 2% month-on-month increase in the average listing price for a new vehicle in October to $47,823, but only a 1% rise from the previous year, suggesting prices may have plateaued.

Automakers have had to adjust pricing as cautious consumers hold back on large purchases, a departure from the strong pricing power they enjoyed a few years ago when supply chain issues constrained new model production. Deutsche Bank Research acknowledged these concerns in a note, highlighting potential uncertainties around EV strategies and market penetration as longer-term issues.

Both Ford and GM have concentrated on producing higher-margin gasoline models like Ford's Maverick pickup and GM's Chevrolet Trax compact SUV, as EV sales growth has decelerated. Ford notably canceled its anticipated electric three-row SUV in August, citing an inability to launch the vehicle profitably. GM has also tempered its EV production targets. Meanwhile, the Detroit automakers have claimed market share from Stellantis, which has seen declining sales in North America.

The economic impact on consumer behavior remains a critical focus. Cox Automotive's Chief Economist Jonathan Smoke pointed out that, despite a larger-than-expected interest rate cut by the Federal Reserve in September, there has been no significant improvement in auto loan rates or overall new vehicle affordability. Consumer preferences appear to be shifting towards more economical compact crossovers, which offer lower upkeep costs and better fuel efficiency, as evidenced by U.S. automakers' third-quarter sales data.

For the upcoming earnings, analysts estimate GM's Q3 revenue to increase by about 1% to $44.5 billion, with earnings per share (EPS) projected at $2.46. Ford’s Q3 revenue is expected to grow approximately 2% to $42 billion, with an EPS estimate of $0.48.