The EV Slowdown: Strategic Opportunities in Hybrid and Gas-Powered Auto Stocks

The automotive industry is undergoing a recalibration as the once-unstoppable momentum of electric vehicle (EV) adoption begins to stall. While EVs remain a long-term inevitability, shifting consumer preferences, regulatory uncertainties, and supply chain bottlenecks have created a window of opportunity for legacy automakers to pivot toward hybrid and internal combustion engine (ICE) vehicles. This article examines how Ford, General Motors (GM), and Toyota are leveraging cost advantages, stable demand, and geopolitical tailwinds to position themselves as undervalued investments in a market recalibrating to hybrid and ICE-centric strategies.

The EV Slowdown: A Market Correction in Progress

The EV sector's growth has slowed to a crawl in 2025, with U.S. EV sales rising just 6.7% year-over-year, far below earlier projections. This slowdown is driven by a combination of factors: higher interest rates increasing financing costs, limited charging infrastructure, and consumer hesitancy over upfront costs and range anxiety. Meanwhile, regulatory frameworks are evolving. According to reports, the European Union has extended its ICE production timeline to 2035 while allowing automakers to temporarily increase ICE output to meet compliance targets. These shifts have prompted automakers to rebalance their portfolios, prioritizing hybrids and ICE vehicles to stabilize cash flows and meet near-term demand.

Ford: Hybrid Dominance and Strategic Flexibility

Ford has emerged as a standout in the hybrid segment, with hybrid sales surging 38% in Q3 2024, driven by the F-150 Hybrid's 64% sales increase. The F-150 Hybrid now captures 77% of the hybrid pickup truck market, a testament to Ford's ability to blend performance with fuel efficiency. This success is part of Ford's "Freedom of Choice" strategy, which offers consumers a range of powertrains, including gas, hybrid, and electric.

Despite a 31% drop in EV sales in Q2 2025, Ford's hybrid and ICE segments have offset these losses, with electrified vehicles accounting for 13.5% of total Q2 2025 sales. According to DCF analysis, Ford's valuation appears mixed: a discounted cash flow (DCF) analysis suggests it is overvalued by 14.7%, but its P/E ratio of 11.2x is significantly below the industry average of 18.1x. This discrepancy highlights Ford's strong capital discipline and hybrid market leadership, which may justify its current valuation for investors seeking exposure to a company with both near-term profitability and long-term EV ambitions.

General Motors: Balancing Electrification and ICE Realities

General Motors has adopted a dual-track strategy, investing heavily in EVs while scaling back ICE production to align with current demand. In Q3 2025, GM reported $48.59 billion in revenue, exceeding analyst expectations, and raised its full-year adjusted EPS guidance to $10.13. This performance reflects GM's strategic realignment, including shifting Orion Assembly from EV to ICE production and boosting Chevrolet Equinox output in Kansas.

GM's EV sales surged 111% in Q2 2025, securing a 16% share of the U.S. EV market. However, the company has also prioritized ICE profitability, particularly in full-size trucks and SUVs, which remain highly lucrative. According to DCF analysis, a DCF analysis of GM suggests it is trading at a 21.4% discount to its intrinsic value, with a forward P/E of 8.12x-well below the industry average of 18.7x. This undervaluation may reflect market skepticism about EV profitability, but GM's balanced approach-combining EV innovation with ICE pragmatism-positions it to capitalize on both near-term and long-term trends.

Toyota: Hybrid Leadership and Manufacturing Efficiency

Toyota's hybrid-first strategy has solidified its dominance in the U.S. market, where it commanded a 14.2% share in Q2 2025. Hybrid models like the Camry Hybrid and RAV4 Hybrid account for nearly half of Toyota's U.S. sales, with margins and turn times outperforming industry averages. According to recent investment reports, Toyota's recent $912 million investment in U.S. facilities-expanding hybrid engine production in Buffalo and hybrid Corolla assembly in Mississippi-further cements its cost advantages and supply chain resilience.

Unlike competitors who have pivoted aggressively to EVs, Toyota has maintained a cautious approach, prioritizing hybrids to meet current demand while gradually scaling EV production. This strategy has allowed Toyota to avoid supply chain bottlenecks and maintain affordability, with hybrid models offering fuel savings of $300–$600 annually compared to ICE vehicles. According to DCF analysis, while Toyota's stock appears overvalued by DCF metrics, its P/E ratio of 8.77x is undervalued relative to its industry average of 18.49x. This valuation divergence underscores Toyota's strong cash flow and market share, making it a compelling long-term investment.

Geopolitical and Policy Tailwinds

Global trade policies and supply chain shifts are amplifying the advantages of hybrid and ICE strategies. According to reports, tariffs on Chinese imports, such as the U.S. proposed 25% tax on Mexican goods and 60% on Chinese imports, are pushing automakers to localize production. Ford and Toyota have capitalized on this trend by expanding North American manufacturing, while GM is investing $4 billion in U.S. facilities to bolster ICE production.

Environmental regulations also play a role. The EU's updated CAFE rules allow increased ICE production to meet compliance targets, while China's dominance in EV battery production (75% of global components) has enabled brands like BYD to gain market share in Europe and Southeast Asia. However, these dynamics create headwinds for U.S. automakers reliant on EVs, making hybrids and ICE vehicles a more stable bet in the near term.

Investment Implications

The EV slowdown has created a mispricing opportunity for investors. Ford's hybrid leadership and undervalued P/E ratio, GM's balanced strategy and discounted DCF valuation, and Toyota's hybrid dominance and manufacturing efficiency all suggest these automakers are undervalued relative to their fundamentals.

For Ford, the key is its ability to sustain hybrid growth while managing EV costs. GM's strength lies in its dual-track approach and software-driven profitability, while Toyota's resilience stems from its hybrid-first strategy and supply chain agility. All three companies are well-positioned to benefit from geopolitical tailwinds, including localized production and regulatory flexibility for ICE vehicles.

As the automotive industry navigates this transitional phase, investors who recognize the strategic adaptability of Ford, GM, and Toyota may find compelling opportunities in hybrid and ICE stocks-sectors that are not only stabilizing but also redefining the competitive landscape.