The Resurgence of Ford and GM: A Strategic Shift from EVs to Autonomy and Cash Flow

The automotive industry is undergoing a seismic recalibration as legacy automakers Ford and General Motors (GM) pivot away from their aggressive electric vehicle (EV) strategies toward hybrid technologies, internal combustion engines (ICE), and autonomous driving. This shift, driven by waning consumer demand for large EVs, high production costs, and regulatory headwinds, has sparked a reevaluation of their valuations. For investors, the question is no longer whether these companies can survive the EV transition but whether their strategic realignments and cash flow management practices position them as undervalued opportunities in a reshaped market.

Strategic Realignments: From EVs to Profitability

Ford's 2025 Q3 earnings report marked a pivotal moment in its corporate strategy. The company announced a $19.5 billion charge to scale back its EV ambitions, including the discontinuation of the F-150 Lightning as a fully electric model in favor of an extended-range electric variant (EREVs). This pivot reflects a broader industry trend: shifting capital toward higher-margin ICE and hybrid vehicles. Ford's adjusted EBIT guidance for 2025 was raised to $7 billion, while free cash flow guidance remained in the $2–$3 billion range. By prioritizing profitability over speculative EV growth, Ford is aligning with market realities, albeit at the cost of short-term pain.

GM, meanwhile, has adopted a more measured approach. While it has not abandoned EVs entirely, its 2025 Q3 results-$48.6 billion in revenue and $3.4 billion in EBIT-adjusted-highlighted the resilience of its ICE business. The company raised its full-year EBIT-adjusted guidance to $12–$13 billion, outperforming Ford in cash flow generation. GM's disciplined capital allocation, including a 15% reduction in share count via buybacks, underscores its focus on shareholder returns. Both automakers are now redirecting investments toward autonomy and hybrid technologies, but GM's ability to maintain profitability amid EV headwinds gives it a strategic edge.

Valuation Divergence: Overvaluation or Undervaluation?

Ford's stock valuation remains contentious. A discounted cash flow (DCF) analysis estimates its intrinsic value at $11.69 per share, suggesting a 14.7% overvaluation at its current price of $13.41. However, its price-to-earnings (PE) ratio of 11.4x, well below the auto industry average of 18.8x, indicates the market is discounting its risks heavily. This discrepancy arises from Ford's $19.5 billion charge and its pivot to hybrids, which investors are still parsing. Analysts like Jefferies have flagged endemic challenges in Ford's EV division, which reported a $1.41 billion loss in Q3 2025.

GM's valuation, by contrast, appears more compelling. A DCF analysis suggests its intrinsic value is $96.38 per share, implying a 21.1% undervaluation at its current price. The company's stock has surged 48% year-to-date, reflecting confidence in its supply chain resilience. While risks like high tariffs and warranty costs persist, GM's ability to raise full-year guidance and its focus on hybrid and ICE vehicles position it as a stronger long-term play.

Investor Sentiment and Autonomous Driving: A Tale of Two Strategies

The automakers' divergent approaches to autonomy further highlight their strategic differences. Ford has scaled back its autonomous driving ambitions, disbanding its Argo AI unit and shifting focus to near-term technologies like driver-assist systems. This pragmatic pivot aligns with its broader emphasis on profitability. In contrast, GM's Cruise division is preparing for a "rapid scaling phase" of its robotaxi service, projecting meaningful revenue from autonomy in the near future. While Ford's strategy prioritizes short-term cash flow, GM's bet on long-term autonomy could pay dividends if the sector gains traction.

Investor sentiment reflects these strategic splits. Ford's stock has rallied 39% in 2025, driven by its revised guidance and hybrid focus. However, skepticism lingers over its EV division's profitability. GM, meanwhile, has seen a 48% year-to-date gain, with analysts praising its adaptability and resilience. The market's cautious optimism toward both companies underscores the broader industry's recalibration: investors are no longer betting on EVs as a panacea but are instead prioritizing cash flow and strategic agility.

Conclusion: Undervalued Value in a Shifting Landscape

The strategic shifts by Ford and GM-from EVs to hybrids, autonomy, and disciplined cash flow management-have created a compelling case for undervaluation. Ford's low PE ratio and revised guidance suggest it is being unfairly discounted, while GM's strong EBIT and DCF valuations highlight its undervalued potential. For investors, the key lies in balancing short-term risks with long-term opportunities. Ford's pivot to hybrids and EREVs offers near-term profitability, while GM's bets on autonomy and ICE resilience position it as a stronger long-term contender. In a market increasingly focused on cash flow over speculative growth, both automakers represent intriguing opportunities for those willing to navigate the transition.