Ford’s Commercial Triumph
Over the years, Ford Motor Company (NYSE: F) has redefined the perception of the commercial business. Long regarded as a secondary avenue for sales, Ford’s commercial arm, Ford Pro, has emerged as a powerhouse generating $7.22 billion in EBIT, boasting a profitable 12.4% margin in 2023. In comparison, Ford Blue, the traditional segment, raked in $7.46 billion but with a lower 7.3% EBIT margin. The impressive 19% revenue growth of Ford Pro has undoubtedly caught the attention of its rival, General Motors.
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GM’s Bold Move
A year ago, General Motors (NYSE: GM) unveiled GM Envolve, a strategic initiative aimed at rapid growth by enhancing environmental responsibility, operational efficiency, and driver safety for its commercial clientele. By streamlining operations and offering tailored solutions, GM Envolve seeks to capitalize on the burgeoning commercial market, branching into mobility, energy, delivery, insight, and growth sectors.
The Road Ahead
Traditionally characterized by low margins and high capital demands, the automotive industry is witnessing a shift towards lucrative commercial ventures. GM’s foray into fleet sales has already shown promise, with a remarkable 20% increase in 2023, including a substantial uptick of 28% in government deliveries – the highest in over a decade. Additionally, GM’s plan to leverage OnStar services for commercial customers with software and subscription offerings could potentially bring in $20 billion to $25 billion in annual revenue by 2030.
Should GM succeed in adopting Ford’s commercial playbook, it could prove a shrewd and profitable maneuver, diverging from the former perception of the commercial segment as a less significant revenue stream. Investors keen on the automotive sector would be wise to keep a watchful eye on these developments.