Ford, GM Profits Threatened by Chip Shortages, Soaring Commodity Costs

Edgen Stock·Jan 24 2026, 08:35

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Key Takeaways

Morgan Stanley warns that Ford and General Motors' strategic pivot back to internal combustion engine (ICE) vehicles faces significant headwinds. New risks from memory chip shortages and rampant commodity price inflation threaten to erode profit margins and disrupt production, undermining the recent stock gains for both automakers.

A new memory chip shortage, driven by AI demand, could add $100 to $200 in costs per traditional vehicle and up to $400 per EV.
Key industrial commodity prices have inflated over the past year, with lithium doubling and copper increasing by 45%.
While Ford's stock has gained over 30% and GM's around 50% in the last 12 months, these new supply-chain pressures challenge their profitability outlook.

Chip Shortages Could Add $200 Cost Per Vehicle

Ford and General Motors face renewed supply-chain pressure that could disrupt production and profits, according to a Morgan Stanley analysis released on January 21, 2026. The primary concern is a tightening supply of automotive-grade memory chips (DRAM), as surging demand from the artificial intelligence sector consumes manufacturing capacity. This scarcity is projected to create a cost headwind of $100 to $200 for each internal combustion engine vehicle and a more substantial $300 to $400 for each electric vehicle.

While the immediate impact is on vehicle cost, Morgan Stanley analysts noted the greater risk is a potential outright shortage of chips. If automakers cannot secure enough supply, they could face significant cuts to production output. This development directly challenges the stability of Ford and GM's recent strategy, which involved scaling back EV ambitions to focus on their more profitable traditional vehicle lines.

Commodity Inflation Reaches 100% as Lithium Prices Double

Compounding the chip issue is significant inflation across key industrial commodities. Lithium prices have doubled over the past year, while copper has risen approximately 45%. The price of steel is up about 40%, and aluminum has increased by around 20%. These price hikes directly threaten to squeeze the margins of automakers and their parts suppliers.

The report highlighted that companies with elevated exposure to copper and lithium are particularly vulnerable. This includes not only EV-focused manufacturers like Tesla and Rivian but also critical suppliers such as Aptiv and Lear. The ultimate impact on profitability will depend on hedging strategies and contract structures, but sustained high prices through 2026 could materially erode margins across the sector. This presents a new obstacle for Ford and GM, whose stocks have appreciated over 30% and 50%, respectively, in the last 12 months.