Bank of America has resumed coverage of the North American automotive and auto-technology sector and identified General Motors, Ford and Tesla as its primary stock picks for 2026 as the industry adapts to evolving regulation, shifting consumer demand and progress in autonomous driving.
Analyst Alexander Perry framed the outlook as brighter than many expect, writing that the sector "will outperform expectations this year as automakers adjust to a new regulatory environment that favors their higher margin accretive internal combustion engine vehicles."
Perry singled out Ford and General Motors among original equipment manufacturers as preferred choices, pointing to the potential for analysts to raise estimates as the market moves away from electric-vehicle mandates that had constrained profitability.
In his view, a recent industry pivot toward more profitable gasoline-powered vehicles - notably pickup trucks - should bolster margins and near-term earnings. He also anticipates automakers will increasingly prioritize producing these models while delaying or canceling lower-margin EV programs.
The analyst quantified expectations for the EV market and program changes, writing: "We expect EV sales to decline 20%+ in 2026 from the phase out of consumer incentives, while automakers’ cancellation of 40% of EV programs and extension of over 45% of ICE programs will pressure penetration over the next several years." These shifts, Perry argued, could alter sales mixes and production plans across North American OEMs.
Tesla was included among Bank of America’s top picks for 2026 for different reasons. Perry emphasized the company’s lead in consumer-facing autonomy and its capacity to scale robotaxi services with stronger unit-level economics than rivals. He stated that "Tesla’s point-to-point software is the most advanced solution for consumer vehicles," while noting that competition in robotaxi services is intensifying as other companies move into late-stage development.
Beyond the three stock recommendations, Perry outlined broader sector themes likely to influence 2026 dynamics. He expects U.S. vehicle sales and North American production to exceed consensus, supported by pent-up demand after years of constrained supply and by an aging vehicle fleet.
Two metrics cited as drivers of a potential replacement cycle are record-level miles driven in the U.S. and an average vehicle age of roughly 12.8 years. Both factors, he said, could prompt greater consumer spending on new vehicles.
On autonomy, Perry argued the technology has moved past feasibility into a scaling question, shifting industry focus from "can it work?" to "how fast can it scale," and suggesting self-driving systems and robotaxi platforms could be defining features of the sector’s next phase.
Key points
- Bank of America reinstated coverage and named General Motors, Ford and Tesla as top automaker picks for 2026.
- Analyst Alexander Perry expects the sector to "outperform expectations this year" as regulation tilts toward higher-margin ICE vehicles.
- Trends cited include declining EV sales after incentive phase-outs, cancellation and extension of vehicle programs, stronger U.S. sales and production, and accelerating autonomy.
Risks and uncertainties
- EV penetration may be pressured by the anticipated decline in consumer incentives and cancellations of EV programs, affecting EV manufacturers and suppliers.
- Shifts in production priorities toward ICE vehicles could change supply chains and capital allocation across OEMs and parts suppliers.
- Scaling autonomous systems and robotaxi services remains a pivotal uncertainty - timing and competitive outcomes are not guaranteed.