Ford Motor Company: A race to the Future

Ford Motor Company is a well-known American multinational automobile company that engages in the manufacturing, designing, and servicing of Ford trucks, utility vehicles and cars as well as Lincoln luxury vehicles. The company operates in three segments. Firstly, there is the automotive segment which involves the development, manufacturing, and servicing of the company’s products. The second segment is the mobility sector whose primary objective focuses on the development of Ford’s autonomous vehicles and related businesses. Within this division, the company owns Argo A.I. and Spin, a developer of autonomous driving systems and a micro-mobility service provider respectively. The Last segment of Ford’s operations is its credit segment which primarily deals with vehicle-related financing and leasing activities. 

In recent years the company has worked to electrify its best-selling legacy products. By launching products such as the all-electric Mustang Match E and Ford F-150 Lightning, Ford has put itself in a position to compete with companies like General Motors (GM) and Tesla. The company sold 27,140 electric Mustangs in 2021, the car’s first full year of sales. This made it the third best-selling electric vehicle (EV) in the U.S. in 2021 according to Annie White of Cars and Driver, behind the TESLA Model Y and Model 3. 

By releasing the electric F-150 lightning, the company hopes to get a boost in growth and revenue. This is because the F-150 pickup truck has been America’s best-selling vehicle for 40 plus years, according to an article by Barron’s. The F-150 lightning pickup truck also seemed to be a bigger hit than the March E Ford. This is because when the company halted reservations of their F-150 pickup truck in December 2021, it had about 200,000 reservations already. 

Even as demand for EVs grows, investors still need to pay attention to Ford’s financial past and future trajectory. In the market end report, Ford reported a revenue of 37.7 billion USD, a 5% increase year on year. Furthermore, according to MarketWatch, Ford ended the quarter with more than 36 billion USD in cash. This figure includes investments in Rivian Automotive Inc. which was valued at 10.6 billion USD in 2021 as Ford retains a 12% stake in the automaker. Consequently, the company reported a net profit of 17.9 billion USD, up from the net loss of 1.3 billion USD for 2020. However, on the 3rd of February 2022, Ford Motor’s reported its end of year earnings. In the release of this report according to Bloomberg, Ford disclosed that the share price fell 4% in after-trading hours of Thursday the 3rd of February 2022 following fourth-quarter earnings that fell short of wall street forecasts. Therefore, despite healthy overall annual progress in 2021, this latter fact demonstrates that Ford’s stock performance still can underperform.

This stock dip, according to the company’s chief financial officer John Lawler, was caused by computer-chip shortages and other challenges linked to the Covid-19 crisis. These limitations and related inflation of products will likely drag into this year as noted by articles published by Bloomberg and the Washington Post on the 25th January 2022. Additionally, a report by the Commerce Department highlighted that global shortages of chips will not ease up until the second half of this year and may even push through to 2023 as a result of delayed scarcity of parts. However, according to research firm IHS Markit, whose forecasts are known to be used by auto suppliers to plan production schedules, global production of vehicles is expected to increase about 9% from last year to 76.4 million vehicles. The research firm also estimated output in North America to increase by about 17% in the region from last year. However, Mark Fulthorpe, an analyst who heads the IHS Markit’s global production analysis, also claims that computer-chip shortages and other supply-chain problems could further hinder sales and production of vehicles. Specifically, Fulthorpe cited disruptions in chip output from recent floods in Malaysia and Covid-19 restrictions in Japan. 

However, like its competitors, Ford, has benefitted from surging new vehicle prices and thin selection on dealership lots, according to an article by the Wall Street Journal. This has pushed the average price of vehicles paid by US consumers to more than 40,000 USD last year, according to research firm J.D. Power. 

Ford reports that in January 2022, the sales of its EVs grew almost 4 times faster than the overall industry segment with new retail orders in January hitting a new record of 90,000 up from 71,000 in the same period in 2021 and 20,000 in December. The firm’s chief executive officer, Jim Farley, expects EVs to represent at least 40% of its products by 2023 while promising to double the company’s production capacity to at least 600,000 EVs by 2023. This will aid the company’s ‘Ford Plus plan to transform the company and thrive in this new era of electric and connected vehicles, said Mark Ruby, the company’s chief communication officer, in an emailed statement. According to Bloomberg, the company is also spending 11.4 billion USD with South Korea’s SK Innovation to build three battery factories and an EV truck plant in Tennessee and Kentucky, which could help triple its outputs of its new all EVs. All of these illustrate to investors that the company is trying to align itself with market demand, particularly in the field of electric and autonomous vehicles.

Overall, Ford’s race to be a major player in the production of electric vehicles is still young. In focusing on research and development, the company has committed to developing new products such as its all-electric F-150 pick-up truck, while continuously trying to improve the performance of their old products. However, the company still has a long way to grow in terms of the production of autonomous vehicles and gaining market share from its competitors. Moreover, despite the company’s strong financial position throughout the global COVID-19 pandemic, its growth in future will be dependent on the possible effects of disruptions to its supply chain.

Analyst: Jenny Enow-Akpa

Sector Head: Robert Armstrong-Jones