Input costs squeeze automaker margins

The auto industry is facing a squeeze between strong vehicle demand and rising production costs. Detroit's major manufacturers reported third-quarter results on October 28, showing revenue growth alongside warnings about higher expenses for materials and logistics.

General Motors, Ford, and Stellantis all saw their top lines increase. GM revenue rose 2.9% year-over-year, while Ford's increased by 2% and Stellantis' by 1%. Sales of light-duty trucks drove much of this performance. GM reported a 9% increase in truck sales, and Stellantis saw U.S. pickup sales jump 34%. Ford's F-Series continued to lead its lineup.

Analysts attribute the sales strength to consumer resilience despite high prices. The average new vehicle transaction price reached just over $50,000 in September, near a record high. Sherry Ann House, Ford's chief financial officer, told investors that customers remained active despite higher fuel prices, interest rates, and inflation.

The cost structure, however, is deteriorating. Tariffs on imported steel, aluminum, and copper have raised material costs. Copper prices have climbed due to tariffs and global demand for electric vehicle batteries and data centers. Computer memory chips are also pricier, driven by tight supply chains and artificial intelligence demand.

Diesel prices have added to the burden. The average price per gallon hovered around $6.35, near its September all-time high. This impacts freight costs for moving parts between the U.S. and Canada, where supply chains are deeply intertwined. Paul Jacobson, GM's CFO, stated that GM forecasts material and diesel costs will run the company as much as $2 billion this year. He added that the company is still paying about $2.5 billion in tariff costs, a figure lower than earlier estimates due to refunds.

Ford faces a similar headwind. CEO Jim Farley said commodities, memory, and logistics costs represent a year-over-year headwind of about $2 billion for the company. Ford executives noted that growth in software services and parts is helping offset these expenses. Stellantis CEO Antonio Filosa described higher raw material prices as an industry-wide phenomenon. The company plans to provide more specific cost data in the fourth quarter.

The electric vehicle sector presents a mixed picture. One year after the federal tax credit ended on September 30, 2025, EV sales have stabilized but not surged. EVs currently account for about 6% of new U.S. car sales. Hybrids, however, are gaining traction, with sales up 27% in the past year. GM reported overall third-quarter sales down 6% compared to the previous year, partly due to a smaller EV market. Tesla regained ground, capturing almost 52% of new U.S. EV sales this year.