Detroit Three face $2 billion material costs as diesel and chip prices climb

American automakers reported third-quarter earnings on Wednesday, revealing a mix of strong sales and rising production costs. General Motors, Ford, and Stellantis all posted revenue increases, but each cautioned investors that input prices for steel, copper, and computer chips are eroding profits. The industry faces a squeeze from both demand-side strength and supply-side inflation.

GM reported that its revenue rose 2.9% in the past year, while Ford saw a 2% increase and Stellantis reported a 1% gain. Light-duty truck sales drove much of this growth, with GM truck sales up 9% and Stellantis pickup sales in the U.S. up 34%. Ford’s F-Series remains a top seller. The average new vehicle transaction price hit just over $50,000 in September, near a record high, according to Kelley Blue Book.

Paul Jacobson, GM’s chief financial officer, stated that material costs, including chips and diesel, would run the company as much as $2 billion this year. He added that GM is still paying about $2.5 billion in tariff costs, a figure lower than earlier forecasts due to refunds. Jim Farley, Ford’s CEO, noted a similar headwind of about $2 billion from commodities, memory, and logistics costs. Sherry Ann House, Ford’s CFO, said growth in software services and parts is helping offset these expenses.

The cost pressures stem from several factors. Since 2025, the administration has imposed tariffs on imported steel, aluminum, and copper. Copper prices have also risen due to global demand for EV batteries and data centers. Computer memory chips face a tight supply chain driven by AI demand. Additionally, the average price for a gallon of diesel has hovered around $6.35, just below its September record, according to AAA.

Diesel costs affect logistics, particularly for the U.S. and Canada, which have intertwined auto supply chains. Parts often cross the border multiple times during manufacturing, making freight more expensive when fuel prices are high. Antonio Filosa, Stellantis CEO, described higher prices for memory chips and raw materials as an industry-wide phenomenon. Stellantis executives said they will provide more specific cost data in the fourth quarter.

The end of the $7,500 federal electric vehicle tax credit on September 30, 2025, has also impacted sales. GM reported third-quarter sales were down 6% overall, partly due to a smaller EV market. Jacobson said the company is right-sizing its EV capacity to align with demand. Tesla, which only makes EVs, saw global sales fall year over year, though its U.S. market share has grown to almost 52% of new EV sales, according to Edmunds.

Hybrid sales are rising as consumers seek alternatives to high fuel costs. Edmunds data shows hybrid sales are up 27% in the past year. Sam Fiorani, a vice president at Auto Forecast Solutions, expects the Detroit Three to offer more hybrids in coming years, noting that the transition to fully electric vehicles is taking longer than anticipated. EVs currently make up about 6% of new car sales in the U.S.

Tesla’s CEO Elon Musk discussed a potential merger between Tesla and his rocket company, SpaceX, on separate earnings calls. He said special committees at both companies are discussing the idea and that he believes it would be a good move, subject to shareholder approval. Tesla’s capital expenditures this year are almost double what they were a year ago, with heavy investment in robotaxis and humanoid robots.