Joining me now to dive into the state of the vehicle market and the impact of gas prices. We want to welcome in our next guest that's Kevin Roberts, director of economic and market intelligence at Car Gurus. Uh so consumers are feeling the pain at the pump now, Kevin, in light of higher oil prices amid the war with Iran.Today, according to AAA, the national average now sits a touch above 398 a gallon. So we're knocking on $4. Uh tell us what that means broadly speaking, Kevin.>> Thank you. >> Yeah, it it's ...

Core Insights - The automotive industry is witnessing a shift towards lower-priced electric vehicles (EVs) as incentives fade and consumer caution persists [1][2] - The introduction of lower-priced EVs could potentially improve profitability for automakers and dealers, especially as gas prices rise [3][10] Industry Trends - Ford is planning to launch a flexible platform for various vehicle types by 2027, indicating a strategic move towards more adaptable manufacturing processes [3] - Hybrids are seen as a short-term solution for American consumers, likely remaining relevant for over a decade due to technological advancements [4][5] Consumer Behavior - The removal of taxpayer-funded incentives may lead to stronger businesses as consumers will focus on product quality rather than incentives [8][10] - Younger buyers are less concerned about the power source of vehicles, emphasizing the importance of product quality [9] Competitive Landscape - Legacy automakers like Toyota and GM have advantages such as experience, established reputations, and R&D resources, allowing them to weather financial challenges better than new entrants [12][13] - New companies may struggle to compete due to the established processes and resources of legacy brands [13] Profitability Challenges - Achieving profitability on a per-unit basis remains a challenge for major brands like Ford and GM, with a need for market-based decisions rather than ideological ones [15][16] - Ford's strategy includes reducing manufacturing costs by creating vehicles with fewer parts and longer-lasting, less volatile batteries [17] Vehicle Longevity - The shelf life of vehicles today varies by automaker, with less software-dependent vehicles generally lasting longer [19][20] - Newer brands may face challenges in ensuring their vehicles remain valuable over a long period compared to legacy automakers [22]

Core Viewpoint - Ford Motor Company is experiencing significant challenges in its electric vehicle (EV) segment, with CEO Jim Farley predicting a substantial decline in EV market share due to the expiration of federal tax credits, which could reduce EV sales to 5% of the industry from the current 10% to 12% [1][2] Financial Performance - Ford reported a $4.8 billion operating loss for its Model E electric vehicle unit, with expectations of an additional loss of $4 billion to $4.5 billion in 2026, pushing the break-even target to 2029 [1] - The company anticipates approximately $7 billion in special charges over 2026 and 2027 related to the transition away from its previous EV strategy [5] Market Strategy - Ford is shifting its focus to the "high volume, affordable end of the market," specifically targeting the $30,000 to $35,000 price range for EVs, contrasting with the previous focus on higher-priced electric trucks and SUVs [4] - The company is moving away from building EVs solely to meet regulatory targets, emphasizing a more consumer-driven approach [3] Consumer Trends - There is a growing consumer preference for "partial electrification," with hybrids gaining popularity over pure EVs, now accounting for over 20% of Ford's U.S. sales mix [7] - JD Power reported that affordability remains a significant pressure in the car sales market, with average monthly finance payments reaching $760, contributing to depressed EV retail sales [6] Operational Strengths - Ford's commercial division, Ford Pro, generated $6.8 billion in EBIT for the year, helping to subsidize losses from the electric vehicle segment [6] Political and Economic Environment - The current political landscape is volatile, with Ford acknowledging a partnership with the administration and a reset in emission standards as key factors for 2026 [8] - The company faced an unexpected $1 billion hit in the fourth quarter due to late-year changes in tariff credits for auto parts, complicating its financial outlook [9]

Core Insights - Ford Motor Company experienced a slight revenue increase in 2025, with total revenue rising to $187.3 billion from $185 billion in 2024, but faced significant challenges due to rising expenses and substantial charges related to its electric vehicle (EV) initiatives [1][2] - The company's profitability declined sharply, moving from an operating income of $5.2 billion in 2024 to an operating loss of $9.2 billion in 2025, and net income shifted from a profit of $5.9 billion to a net loss of $8.2 billion [1][2] Financial Performance - Total costs and expenses increased to $196.4 billion in 2025 from $179.8 billion in 2024, which overshadowed the modest revenue growth [2] - In Q4 2025, Ford reported revenue of $45.9 billion, a 5% decrease year-on-year, and a net loss of $11.1 billion, largely due to significant writedowns associated with its EV programs [4] Strategic Decisions - Ford's CEO, Jim Farley, highlighted the company's efforts to improve its core business and execution, including reducing material and warranty costs, while making strategic decisions to position the company for a stronger future [3] - In December 2025, Ford announced it could incur approximately $19.5 billion in special items as it adjusts its EV strategy, focusing more on hybrids and extended-range vehicles [5] Future Outlook - Ford anticipates about $5.5 billion of the total special items to result in cash outflows, primarily in 2026, with the remaining amounts recognized in 2027 [6] - For the full year 2026, Ford forecasts adjusted EBIT of $8 billion to $10 billion, adjusted free cash flow of $5 billion to $6 billion, and capital expenditure of $9.5 billion to $10.5 billion [7]

Core Viewpoint - Toyota Motor is anticipated to report a third consecutive decline in quarterly operating profit due to rising costs and U.S. import tariffs, despite achieving record global vehicle sales and strong demand for hybrids [1] Group 1: Financial Performance - The company is expected to face a decline in quarterly operating profit for the third straight time [1] - Rising costs and U.S. import tariffs are significant factors impacting earnings [1] Group 2: Market Demand - Toyota has recorded strong global vehicle sales [1] - There is a robust demand for hybrid vehicles [1]

Financial Performance - Hyundai Motor Company reported a 22% drop in net profits to KRW 10.365 trillion (US$7.2 billion) in 2025, primarily due to the impact of US import tariffs introduced in April 2025 [1] - Operating profits decreased by 19.5% to KRW 11.458 trillion (US$8.0 billion) as the company absorbed an additional KRW 4.1 trillion in costs related to the US tariffs [3] - The fourth quarter of 2025 was particularly challenging, with net profits plunging by 52% to KRW 1.18 trillion (US$821 million) [1] Revenue and Sales - Revenues increased by 6.3% to KRW 186.254 trillion (US$130 billion) in 2025, despite a 0.1% decline in global vehicle sales to 4,138,389 units [2] - The rise in revenues was supported by an improved product mix, including a 27% increase in eco-friendly vehicles to 961,812 units [2] Market Outlook - Hyundai forecasts a slight increase in global vehicle sales to 4.158 million units in 2026, with revenues expected to rise by 1% to 2% to KRW 190 trillion [5] - Sales projections for key markets in 2026 include North America at 1,231,000 units, Europe at 601,000 units, India at 592,000 units (+3%), South Korea at 700,000 units (-2%), and South America at 328,000 units (+0.1%) [5] Challenges - A Hyundai official described 2025 as a challenging year due to weakening global demand, increased competition from Chinese automakers, and uncertainties surrounding import tariffs [4]

Core Viewpoint - General Motors (GM) has indicated that its electric vehicle (EV) strategy is incurring significant costs, with substantial charges expected in the fourth quarter and ongoing financial impacts anticipated in the future [1][2]. Financial Impact - GM will record approximately $6 billion in fourth-quarter charges related to its EV plans in the US, along with an additional $1.1 billion for restructuring in China [1]. - The charges are primarily due to contract cancellations, supplier settlements, and asset writedowns, reflecting a decline in demand for battery-powered vehicles [1]. - A $1.6 billion writedown was recorded in the third quarter as GM began to shift its strategy following regulatory changes [3]. Sales Performance - EV sales for GM fell by 43% in the fourth quarter after the expiration of the consumer tax credit, prompting a rollback of its EV plans in favor of hybrids and gas-powered vehicles [4]. - Despite the financial setbacks, GM plans to continue offering its existing electric models to consumers [2]. Industry Context - GM's profit warning follows Ford's announcement of a $20 billion reduction in EV production due to similar challenges, including lower-than-expected demand and regulatory changes [5]. - Other automakers, such as Honda, Jeep, and Ram, have also adjusted their EV strategies, with Porsche announcing a $2.2 billion hit as it shifts focus back to hybrids and gas vehicles [6].

Core Insights - Used car pricing is experiencing seasonal movements with significant changes in hybrids and electric vehicles (EVs) as of early 2026 [2][4] - The December 2025 data indicates a reset in pricing dynamics for hybrids and EVs, driven by demand shifts and supply changes rather than just seasonal factors [3][10] Pricing Dynamics - December is historically a volatile month for used car pricing due to dealers' calendar-driven sales goals, leading to increased negotiation flexibility for buyers [5][6] - Hybrids and EVs saw the largest price declines among used vehicles in December, indicating a broader market adjustment rather than typical seasonal changes [7][10] Demand and Supply Factors - The end of tax incentives for clean vehicles after September 30, 2025, led to a decrease in buyer urgency, resulting in softened demand and less pricing power for dealers [8][9] - The used hybrid and EV market is expected to remain competitively priced in 2026 due to the absence of incentive-driven demand and increasing inventory [10][12] Year-over-Year Trends - Despite a decline in December, used hybrid and EV prices were still up 2.1% year-over-year, although this increase lagged behind overall inflation of approximately 2.7% in 2025 [11]

Core Insights - Ford's hybrid vehicles are experiencing unprecedented popularity, indicating a strong consumer preference for hybrid technology over fully electric vehicles [1] - The company is facing challenges in gaining traction in the electric vehicle (EV) market, suggesting potential strategic misalignments or competitive disadvantages [1] Summary by Category Hybrid Vehicles - Ford's hybrids have seen a significant increase in demand, reflecting a growing market trend towards hybrid technology [1] Electric Vehicles - Despite the success in hybrids, Ford has struggled to establish a strong presence in the EV sector, highlighting a gap in their electric vehicle strategy [1]

Core Insights - Ford Motor Company outperformed the industry for the 10th consecutive month in December, indicating strong performance and market resilience [1] - The company increased its market share by 0.6 percentage points for the year, showcasing effective strategic execution [1] - Ford's total sales for the year rose by 6.0% to 2,204,124 units, reflecting both sales and share gains in Q4 and for the entire year [1] Sales Performance - Ford registered a 6.0% increase in total sales for the year, reaching 2,204,124 units [1] - The company achieved sales gains in both the fourth quarter and for the full year, outperforming the industry [1] Market Strategy - Ford's strategy focuses on appealing to a broad customer base through a diverse range of trim series and powertrain offerings [1] - The success of this strategy is evident in the company's ability to gain market share consistently over the past ten months [1]