U.S. car stocks have fallen on Wednesday following a sweeping downgrade by Morgan Stanley analysts. The downgrades included the stock of legacy car makers Ford Motors and General Motors (GM), as well as electric vehicle manufacturer Rivian Automotive.
According to Morgan Stanley, the U.S. auto industry is currently struggling as car makers are dealing with inflated inventory, price cuts, and increasing competition from Asia. This is particularly the case with Chinese vehicle manufacturers, who are collectively producing nine million more cars than they sell in the domestic market.
“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, “Morgan Stanley’s Adam Jonas wrote in a research note.
Jonas downgraded Ford Motors from “overweight” to “equal weight, “while lowering the price target on the stock from $16 to $12 per share.
GM stock was downgraded from “equal weight” to “underweight” by Jones, with the new price target being at $42 compared to the previous $47 per share.
Finally, Rivian stock also went from “overweight” to “equal weight, “and its price target came down from $16 to $13.
After the downgrade from Morgan Stanley, Ford Motors stock dipped by 4.4% to close at $10.42 per share, GM’s stock closed at $45.73 after sliding by almost 5%, and Rivian’s stock dropped by 6.84% for Wednesday’s close of $11.0.