General Motors or Ford: Which Auto Biggie is a Better Buy Now?

Both General Motors GM and Ford F are legacy U.S. automakers navigating a rapidly evolving auto market. While GM finished 2025 on a strong note, beating earnings per share estimates for the 14th consecutive quarter, Ford ended the year on a weaker note, snapping its four-quarter streak of earnings beats.

Both companies face a slowdown in electric vehicle (EV) demand, high tariffs and are taking significant charges to reset their EV portfolios. Yet, they continue to invest heavily in innovation, software, and autonomous driving technologies. Against this backdrop, which stock currently offers a better opportunity? Let’s discuss.

The Case for General Motors

GM emerged as the top-selling automaker in the United States in 2025, achieving its highest market share in a decade at roughly 17%. The company expects North America EBIT margins to improve to 8-10% this year, up from 6.8% in 2025. This improvement is expected to come from lower costs, a stronger product mix and the elimination of one-time headwinds that weighed on last year’s results.

Beyond traditional vehicle sales, GM’s software and services business is becoming an increasingly important profit driver. Advanced offerings such as OnStar and Super Cruise recorded record subscriptions in 2025. Deferred revenues from software and services are expected to climb to $7.5 billion by the end of 2026, nearly 40% higher than 2025 levels. This shift toward recurring software revenues gives GM a potential long-term margin advantage.

GM is also focused on shareholder returns. In 2025, the company repurchased $6 billion in shares and paid over $500 million in dividends. The board has approved a new $6 billion buyback program and raised dividends by 20%, reflecting confidence in future cash flow generation.

That said, GM’s EV momentum faces near-term challenges. Weaker-than-expected demand and changes in U.S. tax incentives led to $7.6 billion in EV-related charges in 2025. While management expects these charges to continue in 2026, they should be smaller.

Tariffs remain a headwind, with projected gross costs of $3-4 billion this year, slightly above 2025 levels due to an additional quarter of exposure. For the first quarter of 2026, GM anticipates a tariff impact of $750 million to $1 billion.

The Case for Ford

Ford finished 2025 as the third-largest automaker in the United States, with a 13.2% market share. The F-Series remained America’s best-selling truck.

A major driver of Ford’s growth is its Ford Pro division, which combines vehicles, software, and physical services. Paid software subscriptions grew 30% in 2025, and Ford expects software and physical services profits to rise 6.5% in 2026. Additionally, Ford Energy represents a strategic, high-margin growth opportunity. The company plans a $1.5 billion investment in 2026, targeting 20 GWh of battery storage capacity by 2027. These initiatives diversify revenues beyond traditional auto sales and add long-term growth potential.

Ford’s high dividend yield of more than 4% is a notable advantage, particularly for income-focused investors.

Ford is also refocusing its EV strategy toward more affordable vehicles built on a shared platform. The company took $15.5 billion in EV-related charges in the fourth quarter of 2025 and expects around $7 billion in special charges over the next two years, mostly in 2026, as it restructures its EV business and sells certain assets.

On the tariff front, Ford anticipates a significant easing in 2026, with costs declining to about $1 billion as full credits take effect. Additional savings from material and warranty cost reductions should help offset higher commodity prices and continued investments in EVs.

The company does face headwinds from Novelis’ disruptions, which will continue to weigh on results. Having said that, management expects about $1 billion of year-over-year improvement in 2026.

2026 Outlook: GM vs. Ford

For 2026, both companies are projecting solid improvements. Ford expects adjusted EBIT of $8-$10 billion, up from $6.8 billion in 2025, with free cash flow improving to $5-$6 billion from $3.5 billion. Growth in Ford Pro and the traditional ICE/hybrid business is expected to offset ongoing Model e losses.

GM anticipates adjusted EBIT in the $13-$15 billion range, slightly above $12.7 billion in 2025. Automotive operating cash flow is projected at $19-$23 billion, up from $18.7 billion last year. GM’s stronger market share and software-driven revenues inspire confidence in its growth trajectory.

Price and Valuation

Ford has outperformed GM on a year-to-date basis.

From a valuation perspective, Ford currently looks more attractive, especially on a price-to-sales basis, suggesting potential upside for investors seeking relative value.

Conclusion

While General Motors benefits from a larger market share and growing software revenues, Ford’s strategic pivot toward affordable EVs, along with its Ford Pro and Ford Energy initiatives, positions it well for diversified growth. That said, GM retains a near-term edge in EVs, having incurred lower restructuring charges compared with Ford’s higher EV-related costs.

Tariff exposure, a persistent overhang for both, is set to ease materially for Ford this year, reducing near-term cost pressure, whereas GM faces higher tariff impacts in 2026. Both companies remain investor-friendly: GM with consistent buybacks and rising dividends, and Ford with a high-yield payout and disciplined capital allocation across its growth platforms.

From a valuation standpoint, Ford trades at a more compelling multiple. Consensus estimates also favor Ford, projecting stronger year-over-year earnings growth for both the current and next fiscal year, reinforcing its appeal as a more attractive buy today.

Ford currently sports a Zacks Rank #1 (Strong Buy), while GM has a Zacks Rank #3 (Hold) now. You can see the complete list of today’s Zacks #1 Rank stocks here

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This article originally published on Zacks Investment Research (zacks.com).

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