US auto stocks fall as Morgan Stanley cuts auto industry outlook to neutral By Investing.com

Morgan Stanley revised its outlook on the U.S. auto industry down to In-Line from Attractive, citing headwinds such as rising inventory levels, affordability concerns and increased pressure from competition in China, which has from being a source of demand to one. of global oversupply.

The report points out that China’s auto industry now produces about 9 million more units than it consumes, putting pressure on global markets. Morgan Stanley warns that this excess capacity will likely be found in other regions, intensifying competition for US automakers.

“Even if these units don’t directly reach US shores, the ‘fungibility’ of lost shares and profits by key US players adds pressure here at home,” Morgan Stanley analysts said in a note on Wednesday.

As part of its sector review, Morgan Stanley downgraded key automakers including General Motors (NYSE: ), Ford (NYSE: ) and Rivian (NASDAQ: ).

At 09:30 ET (1330 GMT), shares of GM, Ford and Rivian were down 3.6%, 2.7% and 4.1% respectively.

GM was moved from Equal-weight to Underweight, while the price target was reduced from $47 to $42. Ford and Rivian shares saw the same downgrades, with price targets falling from $16 to $12 and from $16 to $13, respectively.

“Our cuts to F and GM are supported by our expectations for higher equity loss by the end of the decade, price/mix and China headwinds, regulatory compliance and EV/AV/ROW/Other risk that may impact profitability, leading to lower normalized earnings and valuation,” analysts noted.

For RIVN, the downward revision reflects the “incorporation of AV/ADAS capital intensity that may be required to meet the technological underpinnings that attracted Volkswagen as a JV partner.”

As such, analysts have raised their annual capital spending estimates by $200 million to $300 million per year starting in 2026.

In addition to the downgrades of GM, F and RIVN, Morgan Stanley also cut its ratings Magna International (NYSE: ) and Phinia ( PHIN ), while upgrading franchise dealerships such as Asbury Automotive ( NYSE: ) and Lithia Motors ( NYSE: ), among others.