Bank of America lists the top three preferred stocks of automakers for 2026

Investing.com - Bank of America has resumed coverage of the North American automotive and auto technology sector, naming General Motors, Ford, and Tesla as 2026’s top automotive stock picks, as the industry adapts to regulatory shifts, changing vehicle demand, and advances in autonomous driving technology.

Analyst Alexander Perry stated that the sector “will outperform expectations this year as automakers adapt to a new regulatory environment that favors higher-margin internal combustion engine vehicles.”

Among original equipment manufacturers (OEMs), Perry particularly recommends Ford and General Motors, citing “the potential for upward revisions in earnings forecasts due to recent shifts in electric vehicle and emissions regulations that have limited profitability over the past few years.”

The analyst noted that the recent shift toward more profitable gasoline-powered vehicles, especially pickup trucks, could support margins and profits in the short term.

He also expects that as automakers delay or cancel lower-margin electric vehicle projects, production will increasingly focus on these models.

Perry wrote, “We expect that due to the removal of consumer incentives, EV sales will decline by more than 20% in 2026, while automakers cancel 40% of EV projects and extend over 45% of internal combustion engine projects, putting pressure on EV penetration in the coming years.”

Tesla is also listed as a top pick, with Perry highlighting the company’s leadership in consumer autonomous driving and its ability to more profitably expand its robotaxi service compared to competitors.

Tesla’s technological edge in autonomous driving remains a key differentiator. Perry stated, “Tesla’s point-to-point software is the most advanced solution for consumer vehicles,” adding that competition in robotaxi services is intensifying as more companies enter later stages of development.

Beyond individual stocks, Perry outlined several themes that could shape the automotive sector in 2026. The analyst expects U.S. vehicle sales and North American production to outperform market consensus, driven by pent-up demand after years of supply constraints and aging vehicle fleets.

U.S. vehicle miles traveled are at record levels, and the average vehicle age on the road has risen to about 12.8 years, both factors likely to accelerate replacement cycles.

Meanwhile, autonomous vehicles are at a critical stage of development. Perry said the technology has shifted from “can it be achieved?” to “how quickly can it scale?” indicating that autonomous systems and robotaxi platforms could become one of the industry’s defining features in the next phase.

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