Resilient US truck and SUV demand supports an accelerating race in electrification and autonomy

Overview

This conference-takeaways report examines North American autos demand and the competing EV, autonomy and software strategies presented by GM, Rivian and Scout Motors. Morgan Stanley finds demand for high-end trucks and SUVs remains resilient, but sees execution and cost discipline as decisive for translating technology ambitions into profitability.

Core views

Morgan Stanley says Laguna Day 1 indicated no visible weakening in demand for high-end trucks and SUVs. GM, Rivian and Scout are competing for this large US vehicle segment through different combinations of electrification, autonomy, software and product positioning. The common backdrop is resilient consumer appetite, but the report frames the race around whether companies can execute launches, contain costs and create profitable recurring revenue streams. For GM, management still expects earnings growth in 2027 despite tariffs, DRAM and other commodity costs, fuel and logistics inflation. The cited offsets are a next-generation truck refresh with improved pricing and mix, lower EV losses, warranty improvement, digital revenue and continued Defense growth. Morgan Stanley also expects 2027 to be largely free of the EV-capacity right-sizing cash burden seen in 2026, potentially allowing more shareholder returns and creating significant upside to its $6.5 billion 2027 buyback assumption. GM is prioritizing brand equity, content, inventory and incentive discipline rather than short-term volume or market-share capture; the report views this discipline through a model-year transition and aggressive peer competition as supportive of margins. GM continues to treat EVs as a long-term priority, although management expects a relatively flat year for EV-profitability improvement in 2027 before a step-function improvement in 2028 as next-generation LMR battery technology ramps. Software & Services is becoming a more important growth driver: GM reiterated expectations for $3 billion of recognized revenue and about $7.5 billion of deferred revenue by year-end 2026. Morgan Stanley sees broader Cruise deployment across vehicle types, helped by falling hardware costs, as a key focus and identifies software and services as GM's largest valuation-unlock opportunity. Defense is the most tangible near-term non-auto opportunity, while Energy, Insurance and Rewards/Loyalty remain earlier-stage extensions of the customer relationship. For Rivian, Morgan Stanley says R2 demand is no longer the principal near-term concern. Launch Edition conversion has exceeded management expectations despite an approximately $57,000 starting price; test-drive activity is about twice prior levels, and the customer base is expanding beyond early EV adopters. Although Morgan Stanley retains an Underweight rating, it says the debate is shifting from demand uncertainty toward evidence of production-ramp execution, BOM cost reduction and margin improvement. The report considers R2 potentially transformative for Rivian, but awaits proof that scale can translate into sustainable automotive profitability. The report identifies supplier readiness—particularly among Tier 2 and Tier 3 suppliers—as the binding constraint on the R2 ramp rather than production efficiency at Rivian's Normal plant. Production scale and fixed-cost leverage are the next proof points. Rivian's planned eyes-on, point-to-point functionality by year-end, with a future Autonomy and AI Day likely to begin the rollout, is presented as a longer-term source of demand and pricing upside; Rivian ultimately targets eyes-off point-to-point capability and full L4. Better autonomy functionality could both attract vehicle demand and support higher Autonomy+ ARPU. The Volkswagen partnership provides an early framework for eventual licensing of Rivian's software-defined vehicle architecture and self-driving platform, though near-term attention remains on R2 execution. Scout Motors is reviving the Scout brand with Volkswagen Group backing, combining rugged design and physical controls with OTA capability and direct-to-consumer sales. Its EREV strategy addresses range and towing concerns for less-aerodynamic body-on-frame vehicles. Management targets approximately 500 miles of total range, approximately 150 miles of EV range, 1,000 lb-ft of torque and approximately 800 horsepower; 87% of reservations are currently for EREVs. The Blythewood plant is designed to flex between BEV and EREV output with minimal disruption. Scout targets customer deliveries in 2028 and pricing in the high-$50,000s to low/mid-$60,000s MSRP. Its path to profitability depends on BOM and SG&A discipline, manufacturing scale and Volkswagen's supplier-scale advantage, while its technology plan uses the VW-Rivian JV's zonal architecture and OTA capabilities but preserves Scout-specific software and driving characteristics.

Analysis framework

Morgan Stanley synthesizes management presentations from its Laguna conference, assesses demand signals and product positioning, then connects operating execution, costs, technology roadmaps and recurring software opportunities to earnings, cash flow and valuation. The report uses DCF and sum-of-the-parts valuation frameworks for the individually covered companies.

Methodology notes

• Valuation methodsDCF (Discounted Cash Flow)

  DCF-derived price targets

  The report discounts long-term operating assumptions to estimate value, including GM revenue and EBIT growth through 2035 and Rivian automotive assumptions.

• Valuation methodsSOTP (Sum-of-the-Parts) Valuation

  Rivian Automotive and Software & Services sum-of-the-parts valuation

  Morgan Stanley values Rivian's automotive and software-and-services segments separately and combines them into its $14 target price.

• Industry AnalysisUpstream-Midstream-Downstream Transmission

  Supplier readiness as a constraint on Rivian's R2 production ramp

  The report traces R2 output risk to slower Tier 2 and Tier 3 supplier ramps rather than internal plant productivity.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• General Motors Company (GM.N)

  Beneficiary of resilient truck and SUV demand, next-generation truck mix, lower EV losses, software growth and Defense optionality.

  Strengths

  Margin and inventory discipline; expected 2027 earnings growth; Software & Services and Defense growth opportunities.

  Weaknesses

  EV profitability improvement is expected to be relatively flat in 2027.

  Comparison

  Competes for the high-end truck and SUV segment alongside Rivian and Scout.

  Risks

  Commodity, tariff, fuel and logistics inflation; weaker SAAR or economic backdrop; China losses; EV/AV execution and regulatory risk.

• Rivian Automotive, Inc. (RIVN.O)

  R2 demand appears resilient, while autonomy and technology licensing are longer-term potential growth drivers.

  Strengths

  Launch Edition conversion exceeded expectations; test-drive activity is ~2x prior levels; VW partnership provides a technology-licensing framework.

  Weaknesses

  The key debate is production ramp, BOM cost reduction, fixed-cost leverage and sustainable margins.

  Comparison

  R2 competes in the broader electrified SUV and truck market; Scout expects to use VW-Rivian JV architecture.

  Risks

  Supplier readiness, execution mishaps, competition and volumes, dilution from capital raises, and greater-than-expected compute/AV/ADAS capex.

• Scout Motors

  An emerging competitor using EREV technology and Volkswagen scale to target rugged large vehicles.

  Strengths

  87% of current reservations are EREVs; flexible BEV/EREV manufacturing design; Volkswagen-backed sourcing scale.

  Weaknesses

  Customer deliveries are targeted only for 2028 and profitability depends on cost control and manufacturing scale.

  Comparison

  Differentiates through EREV capability, rugged design and physical controls while leveraging VW-Rivian technology.

  Risks

  Execution on commissioning, cost control, production scale and customer-delivery timing.

Key data

• GM 2027 buyback assumption$6.5bnMorgan Stanley sees significant upside to this assumption as 2026 EV-capacity right-sizing cash burdens ease.
• GM Software & Services revenue$3bn recognized revenue and ~$7.5bn deferred revenueManagement expectation by year-end 2026.
• Rivian R2 starting price~$57kLaunch Edition conversion exceeded management expectations at this price point.
• Rivian test-drive activity~2x prior levelsDemand indicator cited for R2.
• Scout EREV reservation mix87%Share of current Scout reservations for EREV configurations.
• Scout EREV specifications~500 miles total range, ~150 miles EV range, 1,000 lb-ft torque and ~800 hpManagement targets for the EREV offering.
• GM target price$101DCF-derived target, implying ~7.3x 2026 EPS of $13.93 and a ~1.2x premium to current trading levels.
• Rivian target price$14SOTP of DCF-derived Automotive and Software & Services segments.

Impact & implications

The report argues that resilient large-vehicle demand provides a constructive backdrop, but value creation will depend on margin discipline, supply-chain execution and the ability to monetize software and autonomy. GM's near-term case centers on truck mix, lower EV losses and software optionality; Rivian's hinges on executing R2 scale-up; Scout's depends on delivering its differentiated EREV product at targeted cost and price points.

Risks

• GM faces commodity, tariff, fuel and logistics inflation, weaker SAAR or economic conditions, China losses, EV/AV execution risk, regulatory risk and possible failure to re-rate.
• Rivian faces supplier-ramp constraints, execution risk, competition and volume risk, potential dilution from capital raises, and potentially higher compute, AV and ADAS capital expenditure.
• Scout's path depends on disciplined BOM and SG&A costs, successful manufacturing scale-up and delivery execution.

What to watch

• GM's next-generation truck refresh, inventory and incentive discipline, and progress toward 2027 earnings growth.
• GM Software & Services revenue and deferred revenue by year-end 2026, Super Cruise expansion and the expected 2028 EV-profitability improvement.
• Rivian R2 supplier readiness, production ramp, BOM-cost reductions, fixed-cost leverage and margin progress.
• Timing and functionality of Rivian's eyes-on point-to-point rollout and its Autonomy and AI Day.
• Scout plant commissioning, EREV reservation conversion, flexible BEV/EREV production and progress toward 2028 deliveries.