Ford Motor Company, Tesla, electric vehicles, American auto industry, stock market, investment opportunities
Ford Motor Company (NYSE:F) has been a mainstay of the American auto industry for more than a century, but the recent shift to electric vehicles (EVs) has left the company struggling to keep up with rivals, especially Tesla (TSLA). Despite a positive sales update for February, Ford’s stock has dropped by almost 25% from its early-February highs, which has investors concerned about the company’s future. However, there is cause for optimism as buyers have flocked to support this week’s much-needed recovery. Ford needs to meet its ambitious target of having 600,000 EVs produced annually by year’s end in order to prove its leadership. A fantastic opportunity to invest in Ford’s recent performance exists for investors who are patiently waiting on the sidelines.
FORD’S RECENT PERFORMANCE
In comparison to Tesla, Ford’s poor performance has been quite obvious. While Ford’s stock plunged from its February peak, leaving investors dissatisfied and uncertain, Tesla was able to hold onto its gains from early January. However, there is cause for optimism as buyers have flocked to support this week’s much-needed recovery. Ford needs to meet its ambitious target of having 600,000 EVs produced annually by year’s end in order to prove its leadership. A fantastic opportunity to invest exists for investors who are patiently watching from the sidelines.
EV Business at Ford
Ford’s electric vehicle (EV) business has been a glaring weak point for the company, with losses of $3 billion before taxes over the last two years and an anticipated loss of the same amount in 2023. Ford Model e, the company’s electric vehicle division, is anticipated to achieve profitability before taxes with an 8% pretax profit margin by late 2026. Ford expects to produce 600,000 electric vehicles annually, with a target of 2 million by the end of 2026. The upcoming “teach-in” event by the company will offer fresh perspectives on the state of its Model e segment (Ford’s EV business) and its Ford Pro segment (Ford’s commercial business), which could allay investors’ concerns regarding its EV transformation.
Performance of Tesla
Since its lows in January, Tesla’s stock has outperformed its competitors, bolstering investor confidence in the industry’s top EV manufacturer. Notably, Moody’s upgraded Tesla’s credit rating and predicted that Elon Musk’s company would continue to be a leader in the production of battery electric vehicles with strong profitability. According to reports, Tesla has been growing in Europe and China, which is due to its price reductions. Because of this, Tesla effectively squeezed its competitors’ lives with the pricing lever.
Ford facing a headwind
Ford’s auto sales may suffer further if the banking crisis worsens the macroeconomic headwinds that it is already causing. Additionally, the percentage of auto loans that were declined rose from 5.8% in October 2022 to 9.1% in February. Investors shouldn’t rule out a slowdown in credit and lending activity, even if the recent banking crisis didn’t spread to other banks and engulf them. In order to deal with the increased stress in the sector, lenders are likely to create excess liquidity buffers soon. Ford’s sales cadence may be impacted as a result over the coming quarters, which may force the company to continue discounting in order to move volume.
Ford’s Chinese Price War
Ford reduced the cost of its Mustang Mach-E electric SUV by nearly $6K, joining the price reduction trend in China. But the China Association of Automobile Manufacturers, also known as CAAM, has noticed the price wars in China. It pleaded with market participants to stop using “disruptive” pricing practises. It emphasised that automakers should “return to rationality in the auto industry to bring order to the market” instead. Because of this, the initial excitement over China’s reopening from its COVID lockdowns may have been overshadowed by concerns about slowing sales growth in the country, which is the largest EV market in the world.
Opportunities for Investment
Despite the challenges Ford is facing, astute investors are aware that there are often opportunities when the financial media and news are negative and when investors are generally taking less risk. Investors who waited patiently for their turn can benefit from the current buy level. The window of opportunity for Ford to reverse its medium-term downtrend (as measured against its 50-week moving average, or MA; blue line in our chart) is, however, getting smaller. If Ford’s next surge fails to break through that zone, investors should be cautious about adding more positions.
Conclusion
Investors are unsure about Ford’s future given its difficulty keeping up with the transition to electric vehicles and, in particular, Tesla’s strong performance. However, there is cause for optimism as buyers have flocked to support this week’s much-needed recovery. Ford needs to meet its ambitious target of having 600,000 EVs produced annually by year’s end in order to prove its leadership. The upcoming “teach-in” event by the company will offer fresh perspectives on the state of its Model e segment (Ford’s EV business) and its Ford Pro segment (Ford’s commercial business), which could allay investors’ concerns regarding its EV transformation. Despite the challenges Ford is facing, astute investors are aware that there are often opportunities when the financial media and news are negative and when investors are generally taking less risk.
Ford has been attempting to increase its efforts in the EV market, but it has encountered difficulties with production capacity and profitability. Losses of $3 billion before taxes over the last two years and an anticipated loss of a similar amount in 2023 can be attributed to the company’s EV business. Ford Model e, an electric vehicle, is expected to be profitable before taxes by the end of 2026 with an 8% pretax profit margin. By the end of 2026, the company hopes to produce 2 million EVs annually. The company currently plans to produce 600,000 EVs annually.
With a market capitalization of over $700 billion, Tesla, on the other hand, has been a dominant player in the EV industry. Due to price reductions, the company has seen success in China and Europe. Because of this, Tesla effectively squeezed its competitors’ lives with the pricing lever. However, Tesla has also encountered difficulties with regard to production and profitability, particularly in the face of escalating rivalry from other automakers.
Despite the challenges Ford and Tesla are facing, shrewd investors are aware that opportunities are frequently found when the financial media/news is negative and when investors take a general risk-off. Investors who waited patiently for their turn can benefit from the current buy level. The window of opportunity for Ford to reverse its medium-term downtrend, however, is closing. If Ford’s next surge fails to break through that zone, investors should be cautious about adding more positions.
In conclusion, Ford is finding it difficult to keep up with rivals like Tesla as the automotive industry transitions to electric vehicles. Ford needs to meet its ambitious target of an annualised production run rate of 600K EVs by year’s end despite difficulties with production capacity and profitability to prove its leadership credentials. Investors will learn new information about the condition of the company’s Model e segment and its Ford Pro segment at the upcoming “teach-in” event, which could allay their worries about its EV transformation. Despite the significant challenges that Ford and Tesla are facing, astute investors are aware that when the financial media and news are negative and when investors are generally taking a risk-off stance, opportunities are frequently present. Investors who were willing to wait patiently for their turn can therefore benefit from the current buy level.
