Morgan Stanley is bearish on American car stocks and has downgraded the ratings of "American car companies" General Motors, Ford, Rivian, and other auto companies across the board.

Affected by this, American car stocks came under pressure on Wednesday, with GM's stock falling over 6.4% at one point during early trading, Ford falling over 5%, while Tesla's stock price rose over 1% at one point.

On Wednesday, September 25, Morgan Stanley analyst Adam Jonas released a report downgrading the ratings of American car stocks. Jonas wrote at the beginning of the report:

"We are downgrading the rating of the American car industry from 'attractive' to 'as expected.' Overall, our rating downgrade is based on various factors such as international, domestic, and strategic considerations, which we believe investors may not have fully appreciated.

Jonas pointed out in the report that this rating downgrade is based on a comprehensive assessment of a series of domestic and foreign factors, including intensifying price wars, market share pressures, insufficient consumer purchasing power, and rising credit default rates. He emphasized that these factors are gradually eroding the profits of American car companies.

The average transaction price of American cars is nearing historical highs, putting pressure on consumers. Despite a decrease in interest rates, the average monthly car payment in the USA has exceeded $700, making consumers more hesitant when purchasing a car.

Average monthly repayment amount (in USD/month) is close to historical highs.

In addition, for consumers with lower credit scores, the credit default rate continues to rise, meaning they are finding it increasingly difficult to afford the cost of buying a car. Data from Auto Asset-Backed Securities (ABS) shows that more and more consumers are falling behind on payments for a longer period of time, with higher severity, further impacting car sales.

In the international market, overseas electric car brands are gradually eating into the market share of Western traditional car manufacturers by offering affordable prices, a wide variety, and high-quality products. Intense competition among Japan, South Korea, and electric vehicle (EV) brands is causing multiple pressures on American manufacturers such as falling prices, weakened product portfolios, rising costs, and shrinking market share.

Jonas also mentioned capital discipline and regulatory risks. Although there were expectations in the industry for industry consolidation and mergers and acquisitions, these expectations have not materialized. At the same time, to meet strict carbon dioxide emissions standards, compliance risks are continuously increasing, presenting new challenges to companies.

Compliance risk is becoming a key topic for EU original equipment manufacturers.

The capital intensity required for competition in the field of Advanced Driver Assistance Systems (ADAS) and Autonomous Vehicles (AV) is often overlooked. With the rise of Artificial Intelligence (AI) and data themes in the automotive industry, auto manufacturers need to invest billions of dollars in proprietary AI models. Jonas questions the financial capabilities of many traditional auto manufacturers to make these investments.

Morgan Stanley downgraded Ford Motor's rating from "overweight" to "equal weight" with a target price of $12. At the same time, it downgraded General Motors Company's rating from "equal weight" to "underweight".