Ford’s Commercial Triumph
Investors in the auto industry used to view a carmaker’s fleet and commercial segment with disdain, often considered a means to offload vehicles at discounted rates to rental companies. However, Ford Motor Company’s narrative surrounding its commercial business has been nothing short of astonishing.
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In 2023, Ford Pro’s success was evident, matching Ford Blue in earnings before interest and taxes at $7.22 billion. What’s intriguing is the significantly higher EBIT margin of 12.4% for Ford Pro compared to Ford Blue’s 7.3%. Moreover, Ford Pro’s revenue growth outpaced Ford Blue with a 19% increase compared to 8%.
GM’s Strategic Response
Emulating Ford’s commercial success, General Motors (GM) introduced GM Envolve a year ago, aiming to spur rapid growth in its business customer segment. This initiative simplifies the purchasing process, offering tailored packages of GM’s products and solutions to individual businesses. GM Envolve further expands its reach into mobility, energy, delivery, insight, and growth segments.
Endgame In Sight
Traditionally recognized for being capital-intensive with slim margins, the automotive industry has witnessed a shift towards profitability through robust commercial operations, exemplified by Ford Pro. GM is emulating this success, witnessing a 20% rise in fleet sales in 2023, with a notable 28% surge in government deliveries – the highest in over a decade.
GM’s strategic maneuver extends to enhancing OnStar services for commercial customers as it eyes $20 billion to $25 billion in annual revenue from software and subscription services by 2030. Should GM successfully adopt Ford’s commercial playbook, it would mark a swift and profitable stride, one deserving investor applause.