Ford stock exposure higher than expected, says Bernstein

On Tuesday, Bernstein analysts released a report examining the potential impact of new U.S. tariffs on the automotive industry. Their analysis highlighted that Ford Motor Company (NYSE:F) may have more exposure to these tariffs than previously thought. The company’s U.S.-assembled vehicles reportedly contain only 30% domestic content, which could lead to a similar or greater impact on gross profits compared to its peers if tariffs are applied to certain countries.

General Motors Company (NYSE:GM), on the other hand, has confirmed exposure levels in line with Bernstein’s earlier views. GM produces 52% of its vehicles sold in the U.S. domestically, with these vehicles containing 29% domestic content. However, the company relies heavily on Mexico for parts, with 31% of the Regional Value Content (RVC) for U.S.-manufactured cars coming from there.

Stellantis NV (NYSE:STLA) appears to be positioned relatively better than its Detroit Three counterparts. The company manufactures 60% of its U.S.-sold vehicles within the country, with a higher domestic RVC of 47%. This larger domestic supply chain could offer Stellantis some protection against the proposed tariffs.

Rivian Automotive , Inc. (NASDAQ:RIVN) is facing potential headwinds due to the tariffs, especially on steel and aluminum imports. These could weigh on the company’s gross margin percentage by 100 to 200 basis points. Rivian’s exposure to parts tariffs from Mexico and South Korea is also a concern, particularly after the company started insourcing its motors, replacing those previously sourced from Bosch (NSE:BOSH).

Lastly, the report expressed a cautious stance on Polestar (NASDAQ:PSNY), the electric vehicle subsidiary of Volvo (OTC:VLVLY). With significant Mexican and Chinese content in its vehicles, Polestar could face increased risks. According to InvestingPro data, the company’s financial position shows concerning trends, with a weak gross profit margin of -22.6% and revenue declining by 22.5% over the last twelve months. The company’s debt burden is significant, with total debt reaching $4 billion as of the latest quarter. The anticipated start of Polestar 4 sales in South Korea is expected to still involve significant Chinese parts, despite the launch of Polestar 3 production in South Carolina. InvestingPro analysis reveals the company’s current ratio of 0.58 indicates potential liquidity challenges, while its negative free cash flow yield suggests ongoing operational pressures. For deeper insights into Polestar’s financial health and future prospects, investors can access the comprehensive Pro Research Report, available exclusively on InvestingPro, which covers over 1,400 US equities with detailed analysis and actionable intelligence.

Bernstein’s analysis underscores the complexities of the automotive supply chain and the varied impacts that U.S. trade policy could have on different manufacturers. The report serves as a detailed guide on the potential effects of the upcoming tariffs, mapping out the exposure of various companies and suggesting a more strategic approach to the implementation of trade policy to minimize collateral damage in the re-industrialization process. Based on InvestingPro’s Fair Value analysis, Polestar currently appears undervalued, though investors should note that the company faces significant challenges, with 12 additional key insights available to Pro subscribers.

In other recent news, Polestar has secured a 12-month term facility of up to $450 million and renewed its €480 million Green Trade Finance Facility to support its working capital and growth. This financial move comes after the company previously obtained over $800 million in term facilities in December 2024. Meanwhile, Bernstein analysts have adjusted their outlook on Polestar by increasing the stock’s price target to $0.40 from $0.33, maintaining a Market Perform rating. This change follows a strategy update by Polestar’s new management, who are shifting focus to premium electric vehicles and emphasizing cash conservation.

Despite these strategic shifts, Polestar recently reported a 10% year-over-year decline in revenue for the third quarter of 2024, totaling $551 million, alongside an 8% drop in retail sales. The company recorded a net loss of $323 million, although its adjusted EBITDA showed a 28% improvement compared to the same quarter in 2023. Polestar’s updated guidance for the full year 2024 anticipates a mid-teens percentage decline in revenue and a negative gross margin similar to 2023. The company attributes these challenges to lower sales of newer models and market discounting pressures. Additionally, Polestar is considering changes to its American Depositary Shares to better position itself for future fundraising.

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