US automaker stocks Ford Motor Company F, General Motors Company GM and Tesla Inc. TSLA are all down more than 32% in 2022 as the auto industry struggles to cope with continued supply chain disruptions and rising raw material costs. Unfortunately for struggling automakers, Bank of America analyst John Murphy said this week that commodity cost pressures remain at an all-time high for the time being.

Numbers: Murphy estimates that the current total commodity cost per U.S. vehicle produced is about $4,950, up about 124% over the past two years. Murphy said automakers have been able to raise average new-vehicle transaction prices so far to help offset commodity cost pressures, but they may not be able to follow through. this approach any longer. He predicts that U.S. auto ATPs will likely start to decline in coming years as production volumes recover.

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“As such, the compression of the gap between these two factors is expected to put pressure on operating margins/profits for automakers and suppliers, in addition to other additional costs currently manifesting in the value chain. , including premium freight, inventory storage costs and other operating inefficiencies with supply chain disruptions,” Murphy said.

Murphy said industrial metals and petrochemicals had the biggest impact on automotive raw material costs. Automotive steel prices are up 136% from April 2020, and steel accounts for 40% of the raw material cost of an average vehicle. Over the past two years, aluminum prices have increased by 83%, copper and brass prices by 88% and zinc prices by 188%.

How to play it: Despite rising cost headwinds, Murphy still sees buying opportunities among U.S. automakers. Bank of America has the following ratings and price targets for the stocks mentioned:

  • Ford: Buy rating, target $32
  • GM: Buy rating, target $95
  • You’re here : Neutral rating, target $925

Take Benzinga: As rising costs weighed on auto margins, all three automakers managed to maintain growth despite supply chain challenges. In the last quarter, Ford posted 7.2% revenue growth, GM posted 10.7% revenue growth, and Tesla posted 80.5% revenue growth.

Photo: Courtesy of Ford

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