What happened
It was yet another difficult day for automotive investors. This morning, share prices of Ford (F 0.66%) and General Motors (GM -0.17%) were sliding after a UBS analyst downgraded the automotive stocks.
Nio (NIO -5.00%) investors weren't having much of a better morning either, as the Chinese automaker's stock was falling likely on news that fellow EV maker Rivian issued a significant recall of most of its vehicles.
As a result of all of this news, Ford's stock was down by 6.7% this morning, General Motors' stock slid 5.2%, and Nio's shares were down by 2.4% as of 12:08 p.m. ET.
Image source: Getty Images.
So what
Investors were reacting strongly to UBS analyst Patrick Hummel downgrading Ford's stock to a sell rating today, down from his previous neutral rating, and cutting the automaker stock's price target to $10, down from $13.
Hummel also downgraded GM's stock to a neutral rating, down from his previous buy rating for the company's stock. The analyst is concerned about the fact that the broader automotive industry is quickly moving toward an oversupply of vehicles, as well as a potential slowdown of consumer demand, according to TheFly.com.
The analyst also noted that Ford could be in a more difficult position than GM and some of its other peers because its North American earnings before interest and taxes (EBIT) margins aren't as strong and could face additional pressure during a recession.
Making matters worse for Ford today was the fact that the company reported that its vehicle sales in China were down 11% in the third quarter (which ended on Sept. 30) to 133,000. While the company's vehicle sales increased on a sequential basis, the year-over-year decline likely disappointed investors.
And finally, while there was no company-specific news about Nio today, shares of the Chinese EV maker may be falling in response to the negative automotive news today.
Rivian recently said that it is recalling about 13,000 vehicles -- nearly all the vehicles it has delivered since it first began production -- because of a loose fastener that could affect the vehicle's steering.
While that's a very specific problem for Rivian, the recall may be weighing on Nio today because any news (good or bad) for one EV maker tends to affect other EV stocks.
Now what
Automotive stocks have suffered along with the broader market's declines over the past year, and today's share price drops from Ford, GM, and Nio show that investors are still a little skeptical of auto stocks.
In addition to the automotive-specific news, investors are also keeping a close eye on inflation and the Federal Reserve's focus on raising interest rates to bring it down. Investors are increasingly worried that aggressive interest rate hikes could spur a significant recession that could end up hurting car sales.
That doesn't mean that Ford, GM, and Nio are bad long-term investments, but it does show that investors will have to likely stomach more market volatility in the near term.
