GM vs. Ford: U.S. defense and energy spur competition for Detroit automakers

Detroit — general motors and ford motor They have been competing with each other for more than a century in racing, vehicle sales, and many other automotive-related activities.

But their latest battle has shifted to the actual battlefield and the US energy grid.

Ford joined GM this year in seeking contracts with the U.S. military after the Trump administration approached U.S. companies to assist the military with their mass-production expertise. The automaker’s efforts so far have focused primarily on military vehicles, but could expand over time.

At the same time, both companies are entering the energy storage systems (ESS) market amid expected increases in consumer needs related to rising energy costs and data centers. Energy storage systems use many of the same underlying technologies as electric vehicle batteries to store electricity for homes, businesses, and even utilities.

Wall Street analysts see both markets as new potential growth areas for automakers. At one time it seemed like new opportunities would arise from all-electric vehicles, but Ford and GM have since lost billions of dollars on these efforts.

“They’re looking for new areas.” morning star David Whiston, senior equity analyst, told CNBC. “Ford is following GM into defense and energy makes a lot of sense because they have all this EV production capacity that they don’t need right now. So instead of selling those factories, this is a way to try to capitalize on the data center boom.”

While both markets are expected to represent a small portion of the companies’ focus and revenue for the time being, they could help automakers diversify and complement their core businesses as new vehicle sales in the U.S. slump.

“Given the profitability of the auto business, it would be difficult to make a big move here, but it certainly could be helpful,” Whiston said.

According to research and consulting firm Global Market Insights, the global ESS market is estimated to grow from $668.7 billion in 2024 to $5.12 trillion by 2034. As part of that, the company expects significant expansion in the U.S.

“We’re seeing this tremendous growth projection, and the growth has already started,” Devon Wilson, vice president of sales and marketing for LG Energy Solutions’ U.S. energy storage division, said at a recent event. “A huge amount of electricity is needed in the country just for basic electricity.”

GM and Ford are looking to use this expected growth to fill the void. Both companies have invested billions of dollars in factories that produce battery cells to meet demand for EVs that didn’t materialize.

GM’s energy business doesn’t currently offer its own ESS, but the military does, and its Ultium Cells joint venture in Tennessee produces storage cells for partner LG Energy Solutions.

In the long term, GM could move further into ESS, including developing next-generation sodium-ion batteries with Denver-based startup Peak Energy. Kurt Kelty, GM’s vice president of batteries and sustainability, said he believes technology can reimagine grid-scale energy storage.

“We are currently developing cells, and the performance of these cells is phenomenal,” Kelty said. “The ESS market is a very attractive market. It’s a big market. It’s growing very quickly and it’s something we can contribute to.”

GM is also partnering with Redwood Materials to repurpose its large EV batteries into energy storage systems. GM also offers residential EV charging and ESS through its energy units.

Meanwhile, Ford announced in December that it plans to spend $2 billion to ramp up its energy business, including converting a recently built battery factory in Kentucky with partner SK On to make energy storage units by the end of 2027. The company also plans to dedicate some of its factory space to manufacturing batteries for home storage at its plant in Marshall, Michigan.

“Investors see value in Ford’s ESS business,” Morgan Stanley analyst Andrew Percoco said in a June note to investors. He also called the path to profitability for Ford’s Model E electric vehicle business an “underappreciated engine.”

Ford Energy, part of the company’s Model E electric vehicle division, expects to lose $4 billion in 2026 before reaching breakeven by 2029. A key turning point is expected to be when the company’s ESS business becomes operational in 2027.

Ford CEO Jim Farley told investors during the automaker’s second-quarter earnings call in July that the company is in its “third round” of selling off ESS’s 20 gigawatt-hours of capacity, after announcing a five-year framework agreement with renewable energy service provider EDF Power Solutions North America.

When it comes to the U.S. defense industry, GM is years ahead of Ford. GM brought back the defense force in 2017 after a 14-year hiatus.

The company has worked with the U.S. military on a number of projects, most recently winning a contract from the U.S. Army to build infantry squad vehicles (ISVs) that could exceed $1 billion, depending on Congressional funding.

Although the contract value is small compared to the company’s $48 billion in sales in the second quarter, it is expected to expand opportunities for the auto industry in U.S. military operations.

“Leveraging the capabilities, scalability and manufacturing capabilities of all auto companies and their tiered suppliers is a huge benefit,” Alfred Grein, executive director of research and technology integration at the Army Combat Capabilities Development Command’s Ground Vehicle Systems Center, told CNBC.

GM said it expects defense revenue to increase to nearly $700 million in 2026 and aims for positive earnings before interest and taxes this year while also building a backlog of future operations.

“We are also working with Lockheed Martin and other leading companies to expand the speed, scale and resiliency of our defense industrial base,” GM CEO Mary Barra told investors in July. “Over time, all of this should make GM Defense a more meaningful and diverse revenue contributor.”

Grein, who manages manned and unmanned ground systems technology across the Army, said the Trump administration has made it easier for new companies, including automakers, to win such contracts. He also said manufacturing in the United States is important.

“Clearly, concerns about foreign company involvement, particularly in Department of Defense products, are becoming increasingly significant,” Grein said.

GM and Ford were among a group of companies awarded prototype contracts to produce heavy infantry squad vehicles, larger versions of what both companies had previously worked on.

Ford has not disclosed many details about the U.S. defense effort. But the company announced Wednesday that it is partnering with General Dynamics Land Systems and engineering firm Ricardo to compete for next-generation vehicles for the British Ministry of Defense’s Light Mobility Vehicle program.

GM and Ford’s defense efforts are the latest in a series of such efforts, most notably the “Arsenal of Democracy,” in which the companies worked with the United States and the Allies during World War II to provide military supplies to fight Nazi Germany.

“We already have a market advantage in the commercial world, and we want to give the U.S. government the same benefits that our commercial customers have,” Farley told investors in July. “This is a great opportunity for us. … We have and will continue to have discussions with the U.S. government about additional defense-related projects.”