GM and Ford shares fall after UBS downgrades point out weaker demand

General Motors’ world headquarters is located in Detroit’s Renaissance Center.

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DETROIT — Shares of General Motors and Ford engine both fell on Monday after two downgrades by UBS, which cited expectations for weaker demand amid inflationary pressures.

Ford shares fell more than 8% during intraday trade before closing at $11.37 a share, down 6.9%. GM lost as much as 7.5% before closing at $32.29 a share, down 4%.

Both GM and Ford shares are down about 45% year-to-date. Both companies have a market cap of just under $50 billion.

UBS analyst Patrick Hummel wrote in notes to investors on Monday that he expects the U.S. auto industry to be challenging for the foreseeable future after posting record profits amid low supply and high demand during the coronavirus pandemic.

He predicted “that it will take three to six months for the auto industry to go into oversupply, bringing an abrupt end to a three-year period of unprecedented pricing power and profit margins for automakers.

The investment firm downgraded Ford to sell from neutral and GM to neutral from buy.

UBS continues to favor GM over Ford as the company picks up momentum in the third quarter and has fewer production woes. Hummel said UBS expects a “solid quarter” for GM, which is scheduled to report third-quarter results on October 25.

Ford said last month that around 40,000 to 45,000 vehicles were affected by the parts shortages, mostly trucks and SUVs with high profit margins that dealers couldn’t match. Ford also said at the time that it expected to book an additional $1 billion in unexpected supplier costs in the third quarter.

Ford is expected to report third-quarter results on October 26.

– CNBC’s Michael Bloom contributed to this report.