Detroit Three face $2 billion hit from rising material costs

General Motors and Ford will each lose approximately $2 billion in profits this year due to rising costs for computer chips, steel, and diesel fuel, both companies told investors Wednesday. The financial hit comes despite record sales of light-duty trucks and overall revenue growth for the Detroit automakers.

General Motors Chief Financial Officer Paul Jacobson stated that material costs, including chips and diesel, would run the company up to $2 billion this year. Ford Chief Executive Officer Jim Farley cited a similar figure, noting that commodities, memory, and logistics costs represent a year-over-year headwind of about $2 billion for his firm. These costs are driven by tariffs on imported materials and a tight global supply chain for electronics.

The average price for a gallon of diesel has hovered around $6.35, just short of its September all-time high, according to AAA data. This fuel cost directly impacts logistics, as vehicles and parts often cross the U.S.-Canada border multiple times during manufacturing. Ford CFO Sherry Ann House said higher fuel prices are impacting freight and energy costs, but the company is not yet seeing a drop in customer demand for trucks.

Revenue continues to rise for the major players. General Motors reported a 2.9% year-over-year increase in revenue, while Ford saw a 2% rise and Stellantis reported a 1% increase. Sales of big vehicles are fueling these numbers. GM's light-duty truck sales rose 9% over the past year, and Stellantis saw U.S. pickup sales jump 34%. The average new vehicle transaction price reached just over $50,000 in September, near a record high, as consumers trade up for larger, more profitable models.

The industry is also adjusting to the end of the $7,500 federal tax credit for electric vehicles, which expired on Sept. 30, 2025. GM reported a 6% drop in overall third-quarter sales, partly attributed to the smaller EV market. GM executives said they are right-sizing their electric production capacity to align with current demand. Meanwhile, hybrid sales have surged by 27% in the past year as shoppers seek alternatives to high gas prices.

Tesla has regained a dominant position in the U.S. electric vehicle market. The company now accounts for almost 52% of new EV sales in the country, according to Edmunds data. Ivan Drury, director of industry insights at Edmunds, attributed the shift to other automakers peeling back their electric investments and buyers defaulting to a known brand. Tesla CEO Elon Musk, however, focused his earnings call on new technologies like robotaxis and humanoid robots, noting that capital expenditures are nearly double what they were last year.

Sam Fiorani, a vice president at Auto Forecast Solutions, described the auto industry as moving at a glacial pace between vehicle generations. He said the addition of tariffs and cross-border disruptions has thrown off supply chain calculations. Fiorani expects the Detroit Three to offer more hybrid vehicles in coming years because the transition to fully electric vehicles will take longer than initially anticipated.