Disrupt or be disrupted? Ford Motor chooses disrupt – The Average Joe

    Disrupt or be disrupted? Ford Motor chooses disrupt

    Victor Lei — Head of Research

    March 3, 2022


    March 3, 2022

    Ford chooses to disrupt. The US automaker is moving to get ahead — lest not get left behind — in the electric vehicle (EV) biz.

    What’s the big deal? Ford (NYSE:F) announced its biggest EV push — planning more investments and reorganizing its business into two distinct units:

    • Gas-powered vehicles focused on profits.
    • Electric vehicles focused on growth.

    Ford’s CEO says each unit requires different skills and mindsets — which could clash as one organization. Over time, Ford’s EV unit will likely eat up its gas business.

    • Ramped up planned EV investments from $30B to $50B over five years.
    • Raised operating profit from 7.3% in 2021 to 10% — aiming to produce over 2M EVs.

    While it’s too late to fend off Tesla, Ford can still take market share from emerging competitors — who are (luckily for Ford)  struggling to meet product targets and supply chain issues…

    • Rivian (NASDAQ:RIVN) is raising its EV prices to combat higher costs — sending its stock down 13% yesterday.
    • Lucid (NASDAQ:LCID) cut its 2022 production target by 35% due to “extraordinary” logistic challenges — down 40% in 2022.

    Of the largest US automakers, Ford is performing the best in 2022 — down 18%, while Tesla fell 28%. But investors are still putting a big premium on Tesla — whose market cap is 10x more than Ford’s — despite Ford doubling Tesla’s sales in 2021.

    Action needed: In Tuesday’s speech, Biden called on Congress to pass more EV, wind and solar incentives — an effort to cut energy costs.

    • One solution: Speed up EV adoption — where road vehicles made up 48.6% of US oil demand last year.
    • Slowly rising: In 2021, EVs (including hybrids) jumped to 10.4% of total vehicle sales — up from under 5% in 2020.

    The Ukraine invasion could encourage a faster push into EV clean energy with the German finance minister saying “renewable energy is freedom energy”.

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