Why Detroit Autos Could Be in Trouble Soon. Hint: Saying Goodbye to Big Profits?
Why Detroit Autos Could Be in Trouble Soon. Hint: Saying Goodbye to Big Profits?
Daniel Miller, The Motley FoolWed, June 24, 2026 at 8:25 AM UTC
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Key Points -
Executives point to a faster than normal shift in demand from larger vehicles to more efficient vehicles.
Rising gas prices and uncertainty surrounding the Middle East conflict are adding to industry pressures.
Potentially losing bread-and-butter sales of full-size trucks and SUVs could devastate Detroit automakers.
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Ford Motor Company (NYSE: F), General Motors (NYSE: GM), and Stellantis (NYSE: STLA) were all too glad to feed America's seemingly insatiable appetite for larger vehicles such as full-size trucks and SUVs. It's well known in the industry that these larger vehicles, often packed with technology and premium options, cost only marginally more to produce than a sedan but can generate much better margins. The market demand became so strong for such vehicles that Ford all but ended making sedans for the U.S. market, unless you count the iconic Mustang. The bad news, however, is that executives are growing concerned about the lucrative full-size truck and SUV segments -- but is it just a speed bump?
What's going on?
There are a couple of trends developing currently that won't favor Detroit automakers' bottom lines. The first is that fuel prices have surged because of the latest Middle East conflict, and while in the past it has taken roughly six months of prolonged high gas prices to really shift demand in favor of smaller, more efficient vehicles, it's happening more quickly this time.
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"I'm not going to sit here and say it's permanent yet," GM North America President Duncan Aldred said, according to Automotive News. "But we are seeing somewhat of a shrinking of pickup trucks, full-size utilities, and some of the heavier [vehicles] and an increase in the more affordable segments of the industry."
Ford Bronco
Image source: Ford Motor Company.
It's true that fuel prices have increased noticeably: A year ago, gasoline averaged about $3.14 per gallon, according to AAA, but it spiked to $4.51 by the middle of last month. Before investors press the panic button, there's already been some relief, as over the past month that average price has dipped back down to just above $4 per gallon, but there's no guarantee this trend will become permanent. Uncertainty surrounding the Middle East conflict will continue to add volatility to gasoline prices.
That said, compounding the issue is that the average price for a new vehicle in the U.S. continues to hover above $50,000, which has put additional pressure on consumers considering vehicle purchases. Some analysts have gone as far to call it an affordability crisis, and it's fair to say that full-size trucks are carrying price tags of luxury vehicles these days and are climbing beyond the reach of some consumers.
What's the solution?
How automakers go about solving this riddle could vary. Stellantis has opted to attack the affordability headwinds as a cornerstone of its broader $70 billion turnaround plan. More specifically, Stellantis will launch nine vehicles priced under $40,000 by the end of this decade in North America, and two of those vehicles will be priced lower than $30,000.
One of Ford's solutions is a bit more forward looking, as it plans to drive electric vehicle (EV) sales higher with its upcoming midsize EV truck priced around $30,000. It'll be the first of many vehicles to incorporate the automaker's new Universal EV Platform, which will also use Ford's recently developed "assembly tree" production system. The combination of those development factors should enable the EV truck to be profitable early in its lifecycle.
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Which brings us to another potential speed bump. Currently, EV batteries are still the most expensive component of the vehicle and, because trucks need to be capable of towing, require larger and more expensive batteries. That could erode some of the juicy margins automakers have grown accustomed to with full-size truck gasoline counterparts.
GM, which has navigated the past few years better than its Detroit rivals, is more confident that its current approach can handle the fluctuation in segment demand. Already GM has seven models starting at $30,000 or less and sold a significant amount of them last year -- about 700,000.
What it all means
Ultimately, if significant demand permanently shifts and the vast volume of high-margin full-size trucks and SUVs begins to decline, it will mean lower profits in the near term until automakers can innovate and/or improve the supply chain and production efficiency. Investors shouldn't panic, and history tells us that it will take more prolonged high gasoline prices to drive such a shift, but it's absolutely worth keeping an eye on for your investment thesis, especially at a time when automakers are still battling profitability with EVs -- potentially losing some full-size truck sales would be a full-size problem.
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Daniel Miller has positions in Ford Motor Company and General Motors. The Motley Fool recommends General Motors and Stellantis. The Motley Fool has a disclosure policy.
Source: “AOL Money”
