Material costs add $4 billion drag to Detroit's bottom line

American automakers reported higher third-quarter revenues on Wednesday, but the gains came with a heavy price tag. Rising costs for raw materials and fuel are squeezing margins across the industry.

General Motors and Ford each expect these input costs to reduce profits by approximately $2 billion this year. Stellantis, which owns Chrysler and Jeep, said it will provide specific figures on its cost headwinds during the fourth quarter.

The pressure comes from multiple fronts. Steel, copper, and computer memory chips have all increased in price. The Trump administration’s tariffs on imported metals have added to the expense of building vehicle frames and wiring.

Diesel fuel, essential for transporting parts and finished vehicles, has also become a major line item. The average price per gallon has hovered near $6.35, just below the all-time high set in September. High fuel prices increase the cost of moving components across the U.S.-Canada border, where supply chains are deeply intertwined.

Despite these costs, consumer demand for large vehicles has remained strong. General Motors reported a 9% year-over-year increase in light-duty truck sales. Stellantis saw U.S. pickup sales climb 34%. Ford’s F-Series continues to lead its sales lineup.

The average transaction price for a new vehicle reached just over $50,000 in September, nearing a record high. Customers are paying more for larger vehicles and premium trims, which generate higher profit margins for manufacturers.

Sherry Ann House, Ford’s chief financial officer, stated on an investor call that customers remain resilient despite higher interest rates and fuel prices. Paul Jacobson, GM’s chief financial officer, noted that maintaining current material prices would make profit planning more difficult for the coming year.

The shift in the electric vehicle market is adding complexity. The $7,500 federal tax credit expired on September 30, 2025. Since then, EV sales have dropped nationally. General Motors attributed a 6% decline in its overall sales partly to a smaller EV market.

However, Tesla has regained market share in the electric segment. It now accounts for nearly 52% of new EV sales in the U.S., up from lower shares in 2024 and 2025. Ivan Drury of Edmunds described Tesla as the default choice for many buyers, comparing the brand to a household staple.

Hybrid vehicles are also seeing a surge in popularity. Sales of hybrids rose 27% over the past year as consumers seek to manage fuel costs. Automakers are adjusting their production plans to include more hybrid models, recognizing that the transition to fully electric vehicles will take longer than initially projected.

Ford plans to offer the Fathom electric truck as a pre-order in early 2027. The vehicle will be priced under $30,000. Meanwhile, Tesla’s capital expenditures are nearly double what they were a year ago, driven by investments in robotaxis and humanoid robots.

Elon Musk, Tesla’s CEO, hinted at a potential merger with his rocket company, SpaceX. He said special committees at both companies are discussing the idea. He told investors that he believes the merger would be a good idea, but noted that shareholder support would be required to make it happen.