Title: Unveiling a Hidden Gem: The Unnoticed Potential in These Two Automotive Stocks
In the past, fleet sales were viewed as a necessary evil, a means to fill excess production capacity for car giants like Ford and General Motors. These low-margin bulk sales to companies such as Hertz were often met with disdain by investors. However, the times have changed, and fleet business is now seeing a new lease of life, especially with the advent of electric vehicles (EVs).
Recent agreements, like GM's 175,000 EV deal with Hertz over five years, are starting to provide intriguing upside. The deal spans diverse vehicle segments and price points, with GM's North American operations chief anticipating close-to-retail profit margins for the EV deliveries. Even Tesla got in on the fleet action, selling Hertz 100,000 Teslas at near-list prices. Such deals have transformed fleet sales from a despised necessity to a potential source of revenue.
Fleet sales could also serve as an insurance policy for EVs. Currently, EVs account for just 5% of U.S. new vehicle sales, a figure historically associated with a sales boom and mass adoption. If the U.S. follows the trend of nearly 20 countries that have already hit the 5% mark, EVs could represent up to 25% of new vehicle sales by 2025. This is a significant upside, but slower mass adoption could be compensated for by fleet sales. Companies like Amazon and FedEx are already moving towards electric vehicles, and Hertz's shift towards EVs is unlikely to be an isolated occurrence.
For Detroit automakers, this is a welcome development. While in the past, large fleet orders led to groans during conference calls, they now offer an attractive revenue stream. The shift towards EVs is a trend that automakers like Ford and General Motors are embracing, and with growing consumer demand and government incentives, the future looks bright for fleet sales of EVs.
Enrichment Data:
- EV Sales Growth: Both Ford and General Motors have reported significant growth in EV sales. GM's EV sales increased by 50% in 2024, with a 125% quarterly rise in Q4. Ford also saw a 34.8% increase in EV sales in 2024.
- Market Share and Competition: General Motors aims to become the #2 seller of electric vehicles in the U.S., while Ford is also targeting new EV buyers.
- Policy and Incentives: The removal of the $7,500 tax credit for EVs is a concern, but automakers are preparing for this change by focusing on state-level support and other incentives.
- Fleet Eligibility and Transition Help: General Motors offers resources for fleet management, including EV education and transition help.
- Future Outlook: Cox Automotive forecasts that one out of every four vehicles sold in 2025 will be electrified, with electric vehicles accounting for approximately 10% of the market total. This trend suggests that both Ford and General Motors are well-positioned to continue growing their EV sales, including fleet sales.
Investors are now viewing fleet sales, especially those involving electric vehicles, as a potential source of revenue, following the disdain they once had. Financing these large-scale fleet orders has become an attractive revenue stream for companies like Ford and General Motors, given the growth in EV sales.
