Despite Falling Stock, Ford’s Ambitious EV Transition Continues to Make Progress


Ford (NYSE:) shares are down almost 40% year-to-date (YTD), reflecting tightening financial conditions, continued supply chain bottlenecks, as well as the company’s ambitious electric vehicle (EV) push that is requiring substantial investments over the next decade.

Still, an improvement in the overall risk sentiment could see investors returning to Ford stock as the company continues to make progress with its EV strategy. Most recently, the company’s top executive shared updates that show Ford’s EV plan is gaining traction.

2/3 of Dealers Agree to Sell Ford’s EVs

Earlier this week, the carmaker’s CEO, Jim Farley, said that around 65% of the carmaker’s dealers have agreed to sell EVs. Roughly 1,920 of the company’s 3,000 dealers agreed to sell battery-powered cars, with 80% of those dealers preferring a higher level of investment for EVs. These words from Farley are likely to ease concerns on the side of investors, who fear that Ford’s multi-billion dollar investment will pressure near-term profits and margins.

Dealers are able to become “EV-certified” under one of two Ford programs. They can opt for a more expensive tier, which involves upfront costs of $900,000, which will see them obtain an “elite” certification and be allocated a higher number of EVs.

The U.S. automaker also allows dealers to withdraw from the program and continue selling the company’s cars. Dealers who did not opt for one of the programs could do that when Ford restarts the certification process in 2027.

Farley said during an Automotive News conference:

“We think that the EV adoption in the U.S. will take time, so we wanted to give dealers a chance to come back.”

Ford has been ramping up efforts to sell EV units since the company split electric cars and legacy vehicles into separate businesses. Farley added the company, and its dealers must cut costs, drive profits, and improve the customer sales experience. The company’s CEO also said that a direct-sales model is expected to be significantly cheaper for Ford than the car industry’s legacy franchised system.

Some analysts share a similar view as they believe that a direct-to-consumer (DTC) sales model could help companies optimize profits. However, automakers like Tesla Inc (NASDAQ:) have been facing certain problems with the sales model, particularly when it comes to servicing vehicles.

Ford’s all-electric car division, known as Model e, currently develops the Ford F-150 Lightning pickup, Mustang Mach-E crossover, and e-Transit van. The car company intends to launch a number of new EVs around the globe as part of its plan to pour tens of billions of dollars into EV technologies by 2026.

More Partnerships That Improve Visibility

Meanwhile, Ford’s global vehicle services and distribution business Ford Pro and Deutsche Post (OTC:), teamed up to advance the deployment of electric vans for logistics. Under the terms of the agreement, Ford Pro will provide over 2,000 electric vans to Deutsche Post worldwide by the end of 2023, the package delivery and supply chain management company said in a release.

“The inked agreement covers a full suite of solutions to operate the electric fleet, including access to Ford Pro’s connected E-Telematics software and charging solutions in order to reduce costs and optimize efficiency as a part of the two organizations’ common zero emission goals.”

The partnership will boost Ford’s plans to achieve zero emissions for all vehicle sales and carbon neutrality across its European operations by 2035. Further, the U.S. carmaker expects to reach carbon neutrality on a global level by 2050.

On a similar note, Deutsche Post said it is committed to reinforcing “clean operations for climate protection and will invest €7 billion in the current decade on its path to net-zero emissions logistics.” The company added it is targeting a share of 60% of EVs used for no-carbon pickup and delivery by 2030.

Earlier this year, Ford’s CEO Farley said he expects the auto industry’s current shift to EVs to trigger major consolidation among car manufacturers and suppliers in the following years.

Farley reiterated his previous stance that car companies must commit substantial amounts of capital to invest in the technologies powering EVs. This trend will likely force smaller carmakers to sell and put additional pressure on emerging EV startups that are struggling to secure funding.

Farley believes the auto industry will witness a high number of acquisitions, as opposed to partnerships and joint ventures that are common nowadays.

“There will be some big winners, some people who transition, some who won’t. Many of the small players cannot afford to make this transition,” Farley said.

Conclusion

Recent updates from Ford show the carmaker has continued to make progress as far as its ambitious EV plans are concerned. The higher visibility, as well as easing supply chain headwinds, could represent a fundamental factor that makes Ford stock’s re-rating higher, given the YTD selloff.



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