In recent years, the automotive industry has witnessed a seismic shift towards electric vehicles (EVs), fueled by both environmental concerns and technological advancements. One company that has been at the forefront of this transition is Ford Motor Company (F).
Traditionally known for its robust lineup of combustion engine vehicles, F’s foray into the EV market has been met with both skepticism and anticipation. However, recent developments suggest that F might be poised to make a significant impact in the EV space, potentially ushering in a new era for the iconic automaker.
Over the past few years, F has worked relentlessly to capture the EV market by launching several EV models. Beginning with the electrification of its most iconic products, the Mustang, F-150, and Transit, F rapidly ascended to become the second-largest EV brand in the U.S. by 2022.
Beyond simply providing zero-emission variants of its top-selling vehicles, the company is leveraging electrification to enhance the qualities that customers cherish most: performance, capability, and productivity. F’s strategy for electrification serves as a cornerstone in the company’s broader mission to achieve worldwide carbon neutrality by the year 2050.
In addition, in 2022, the company bifurcated its EV and traditional business into two distinct units, providing investors with greater transparency into its operations. The EV division was branded as “Ford Model e,” while the conventional operation retained the name “Ford Blue.”
However, despite F’s ambitious visions, the company’s EV division has grappled with major losses. In the fourth quarter of 2023, F’s EV division “Ford Model e” posted a $1.57 billion loss, more than doubling a loss of $631 million during the fourth quarter of 2022. Meanwhile, the company’s top-line and bottom-line figures for the same quarter topped Wall Street estimates.
While discussing the losses from its EV unit during the earnings call, F’s CEO Jim Farley highlighted a pivotal lesson learned. He noted that scaling EVs from 5,000 to 7,000 units per month and entering the early majority customer segment unveiled customers’ reluctance to pay a substantial premium for EVs.
However, in light of the significant losses incurred by its EV segment and customers’ unwillingness to pay premium prices, F’s teams are unwaveringly dedicated to prioritizing cost-effectiveness and efficiency in their EV products. This strategic focus is aimed at competing effectively with more affordable models from Tesla, Inc. (TSLA) and Chinese automakers.
Farley further added that F is reconsidering its strategies regarding EVs. The automaker had previously announced its intention to delay or reduce spending by $12 billion on all-electric vehicles. He emphasized that while F remains committed to the growth of EVs, widespread adoption among mass-market consumers is unlikely until the costs are comparable to traditional vehicles.
As F scales back and reassesses its EV business, it plans to focus more on the sales of hybrid vehicles, particularly trucks. The company anticipates a 40% increase in hybrid sales this year, having sold 133,743 hybrid vehicles in the U.S. in 2023.
Apart from F’s cost-cutting measures to make its EV models cheaper for its customers, the company has further taken significant measures to bolster its EV sales. A recent notable move involves tapping into TSLA’s Supercharger Network, enabling F car owners to conveniently charge their vehicles using TSLA's North American Charging Standard (NACS) plug.
Furthermore, F is offering a complimentary charging adapter to owners of 2021 through 2024 F EV models until June 30, 2024. Following this deadline, customers can acquire the adapter from F for $230.
Also, the forthcoming generation of F EVs will come equipped with NACS plugs straight from the factory, ensuring seamless access to the TSLA Superchargers Network. CEO Farley emphasized that this initiative enhances the public charging experience, offering customers increased choice and playing a crucial role in F’s evolution as an EV brand.
On top of it, F announced its acquisition of Auto Motive Power (AMP), a startup specializing in electric charging technology and battery management software. This strategic move aims to overhaul F's charging infrastructure and reduce the costs associated with its electric vehicles.
Analysts forecast for Ford’s first-quarter earnings reveal a mixed outlook, projecting a 21% year-over-drop in its EPS, reaching $0.56. The company’s revenue, on the other hand, is anticipated to increase 8.2% year-over-year to $42.28 billion.
Bottom Line
Despite the challenges being faced by its EV business, it’s crucial to acknowledge F’s significant advancements in the EV market. By prioritizing the enhancement of performance and productivity, F’s initiatives are in alignment with global carbon neutrality goals.
These strides underscore F’s steadfast commitment to innovation and sustainability within the automotive industry, highlighting resilience amidst the obstacles encountered in its EV segment.
Moreover, F’s proactive measures to enhance EV sales through price reductions and cost-saving initiatives are yielding tangible results, marking a promising trajectory for the company's EV endeavors.
Following an 11% year-over-year decline in January EV sales, F witnessed a notable turnaround in February. In February, F delivered 6,368 electric vehicles, marking an impressive 80.8% increase compared to the previous year. Specifically, sales of its Mustang Mach-E model surged by 64.3% year-over-year, with 2,930 units sold in February.
Furthermore, by tapping into TSLA’s Supercharger Network, F is addressing a critical concern among EV owners regarding charging infrastructure, enhancing convenience and accessibility for its customers.
The National Renewable Energy Laboratory (NREL) revealed that the United States has only reached 3.1% of its 2030 goal for DC fast chargers without the inclusion of the TSLA’s Supercharger Network. However, when factoring in the TSLA’s Supercharger Network, this figure rises to 9.1% of the nation’s target.
As highlighted by TSLA upon the official opening of the Supercharger Network to F’s electric vehicles, the network is expanding rapidly, with the addition of one new stall every hour. Considering the domination of TSLA’s Supercharger Network, the collaboration between TSLA and F could be a pivotal step in bolstering F’s EV sales.
Additionally, F’s strategic acquisition of AMP has demonstrated the company's dedication to advancing charging technology and reducing costs associated with electric vehicles.
F also remains steadfast in its commitment to returning value to its shareholders through dividend distributions. On March 1, the company paid a quarterly dividend of $0.15 to its shareholders. The company’s annual dividend of $0.60 translates to a 4.85% yield on the prevailing price level, while its four-year average dividend yield is 4.83%.
Overall, F’s strategic initiatives and promising developments in the electric vehicle market could position the company for long-term success in the rapidly evolving EV landscape, enhancing its competitiveness and brand loyalty. To that end, investors could closely monitor this stock for potential gains.
