Ford’s Electric Vehicle Strategy Analysis Ford Navigates EV Strategy Shift: An Investor’s Guide

Written By Michael Gary Scott

Ford F has recalibrated its electric vehicle (EV) strategy in response to industry dynamics of sluggish EV adoption and pricing pressures. As competition escalates and the road to EV profitability becomes more intricate than envisioned, Ford is readjusting its course for sustainable growth and market competitiveness. This article delves into the revamped EV strategy by Ford and provides insights for investors on navigating the company’s stock in the current climate.

Ford’s Altered EV Roadmap

Ford has opted to postpone the release of its next-generation all-electric pickup truck, known as “Project T3,” at its new Tennessee facility from 2025 to the latter part of 2027.

Furthermore, Ford is abandoning its plans for a three-row electric SUV, leading to a $400 million non-cash write-down and potential additional costs up to $1.5 billion. Instead, the company is shifting towards hybrid models, expecting them to be more lucrative and better aligned with current consumer preferences. The automaker has revealed a reduction in capital expenditure on EVs, allocating 30% of its annual capital budget to their development, a decrease from the prior 40%.

Despite these setbacks, Ford remains steadfast in its EV aspirations. It plans to introduce a new commercial electric van in 2026 and two additional pickup trucks in 2027. Moreover, Ford still anticipates commencing battery cell production at its Tennessee site in 2025, a pivotal move in securing the supply chain for its future EV models.

Factors to Ponder Before Investing in Ford

In the immediate future, Ford is poised to encounter obstacles, particularly within its Model e division. The company recorded a $2.46 billion loss on EVs in the first half of 2024, with a projected full-year loss ranging between $5 billion and $5.5 billion. This loss is primarily attributed to pricing pressures and escalated investments in next-generation EVs, posing a significant threat to Ford’s overall profitability.

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Additionally, Ford’s warranty and recall expenses have surged, hitting $2.3 billion in the second quarter of 2024. While efforts are underway to enhance the quality of its newer models, warranty costs are expected to remain high for the next 12 to 18 months, further dampening the company’s overall earnings.

Over the past week, the Zacks Consensus Estimate for Ford’s 2024 EPS has declined by 2 cents to $1.88, indicating a 6.5% year-over-year decrease.

Embrace Ford in Your Watchlist

Although Ford faces near-term challenges, particularly in its EV segment, its robust fundamentals position it favorably for long-term growth. Investors are advised to monitor Ford’s progress in curbing warranty costs and achieving profitability in its EV division. With a sturdy dividend yield, an appealing valuation, and promising outlook in the Ford Pro unit, this stock merits inclusion in your watchlist.