In the annals of automotive history, few names resonate quite like the Ford Model T. A paragon of innovation, the Model T revolutionized the industry, capturing the imagination of Americans and kickstarting a love affair with the open road that endures to this day. Though unassuming in appearance, the Model T’s impact was unparalleled, remaining in production from 1908 to 1927.
One captivating tale from the Model T era is the genesis of its moniker, “the Tin Lizzie.” In a remarkable turn of events at the 1922 Pikes Peak race, Noel Bullock and his unassuming Model T, dubbed “Old Liz,” defied all odds by clinching victory. From its humble beginnings as a tin can on wheels, the Model T, now christened Tin Lizzie, astounded spectators by outpacing even the most opulent cars of its time, showcasing both durability and speed.
Fast forward to the present day, where Ford Motor (F) is channeling the spirit of the old Tin Lizzie with its foray into the realm of Electric Vehicles (EVs) through the “Model e.”
Ford’s Electrifying Bet
As the shift toward electric vehicles gains momentum, Ford’s electrification plans have encountered a bump in the road due to a slowdown in EV sales growth. Notwithstanding this setback, Ford maintains a diversified strategy encompassing gasoline and diesel trucks, 4x4s, and hybrid vehicles.
While EVs currently constitute a small fraction of Ford’s total sales, the company boasts the nation’s second most beloved SUV-type EV with the Mustang Mach-E. In 2023, EV sales revenues reached $5.9 billion, paling in comparison to the $102 billion generated by the “Blue” division, which encompasses hybrids, gas, and diesel vehicles. An additional $58 million in sales stemmed from Ford Pro, specializing in commercial vehicles and fleet management services.
Notably, Ford is carving a niche in the EV domain, particularly among fleet-based vehicle operators favoring EVs for everyday short-distance routes. This strategic positioning aligns with Ford’s dominance in the U.S. work truck and van market, with Ford Pro emerging as its most profitable growth engine.
CEO Jim Farley believes that the adoption of EVs by commercial fleets will propel Ford’s growth. Despite not projecting profits from commercial EV sales until the 2026 debut of next-gen vehicles, Ford is leveraging connected-car logistics and service contracts to offset losses, with software and services anticipated to contribute 20% of Ford Pro’s profits by 2026.
Fueling Growth: F-Series Dominance
Central to Ford’s prosperity is the enduring popularity of its F-series trucks, which reigned as the top-selling vehicles in the U.S. for nearly half a century, surpassing competitors like the Chevrolet Silverado by a wide margin.
Ranging from the $38,000 F-150 to premium models exceeding $100,000, the F-series witnessed a surge in profitability post-COVID-19, with gross profits per unit escalating from $2,000 to $4,500. Hybrids are poised to play an increasingly pivotal role in Ford’s growth trajectory, with a marked preference for hybrid trucks and SUVs contributing to record-breaking quarterly hybrid sales.
The outlook for 2024 appears rosy, with a projected 40% upswing in hybrid sales. Despite Ford’s stock bearing a higher price/earnings ratio compared to peers like General Motors (GM) and Stellantis (STLA), the company is primed to accelerate its growth trajectory in the latter half of the decade.
Even in the face of anticipated EV price drops industry-wide, Ford is charting a course towards a record operating profit range of $10 billion to $12 billion. With Ford’s stock warranting attention below $13.50, the company’s upward trajectory is a compelling prospect for savvy investors.
