Ford Motor (F): High-margin investments, boosted electrification strategy put automaker on smooth path to growth

Shares of Ford Motor Company (NYSE: F) have gained 155% over the past 12 months and 65% since the beginning of this year. The company has transformed its operations and invested significantly in electric and autonomous vehicles over the past few years in order to keep up with the changes taking place in the market.

At its investor day, Ford outlined several of the initiatives that it has been undertaking in these areas and indicated that it had increased its investments in electric vehicles. The company believes that the transition to EVs presents it with one of the biggest growth opportunities it has seen in a long time.

Electric vehicles

Ford has increased its investment in electrification to over $30 billion by 2025 and this includes battery development. It expects 40% of its global vehicle volume to be fully electric by 2030. The company is doing well on its current EV models. The Mustang Mach-E has gained popularity in North America, Europe and China while the E-Transit cargo van yields a 40% reduction in maintenance and fuel costs, making it an attractive option for commercial customers.

The range of motor vehicles that Ford is set to produce between now and 2030 is expected to have a flexible architecture that meets the lifestyles of different customers such as cargo vehicles for commercial customers and rugged SUVs for adventure-seekers.

Ford is also working on a scalable BEV architecture for its next-gen pickup trucks and utilities. The company expects one-third of the full-size pickup segment to go fully electric by 2030 in the US alone, which represents over 800,000 vehicles annually. Ford also anticipates 70% of the full-sized bus and van industry to go electric by 2030, which would represent over 300,000 vehicles annually.

Batteries

The energy density and cost of batteries is key to the success of BEVs and Ford has been investing meaningfully in the research and development of batteries. As part of these efforts, Ford established Ford Ion Park to advance battery cell technology and focus on high volume battery manufacturing. The company is also investing in solid-state battery technology. It believes the age of production-feasible solid-state batteries are not too far away thanks to its increased investments in this space.

Transformation

Ford has undertaken several initiatives to transform its operations over the past few years. The company has exited underperforming vehicle platforms, invested in high-margin products, transformed its international operations and worked on reducing costs.  

Ford replaced less profitable vehicles with high volume ones like the Ranger and Bronco and these changes in just three plants are driving an improvement of $1.8 billion in annual adjusted EBIT. In terms of portfolio, the company is focusing on three profitable and growing customer segments which are commercial vehicles, SUVs and select high-margin imports.

Looking at costs, Ford has managed to cut more than $1 billion in annual structural costs in Europe and this, combined with other efforts, have the company on track to reach an EBIT margin of 6% by 2023 in the region.

All the aforementioned efforts have put Ford on a strong path to driving growth and profitability in the coming years.

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