Interactive Investor

ii view: Ford shares hit 20-year high

5th January 2022 11:10

Keith Bowman from interactive investor

Challenges remain, but having outpaced Tesla shares over the last year, and with its own electric vehicle production increasing, we assess prospects.

Increasing Electric Vehicle (EV) production

ii round-up:

Auto maker Ford (NYSE:F) has announced plans to almost double production of its new all-electric F-150 Lightning pick-up truck, sending its shares to a 20-year high. 

The Michigan-headquartered Ford continues to up its battle with rival Tesla (NASDAQ:TSLA) and other manufacturers as it invests more than $30 billion in electric vehicles through to 2025. Buoyed by customer demand, production of the F-150 Lightning is being raised to 150,000 units per year. Deliveries to customers of the pick-up truck will start in the spring. 

Ford shares hit a 20-year high, having more than doubled over the last year. Shares for Tesla and General Motors (NYSE:GM) are up by just over 55% in that time. European motor major Volkswagen (XETRA:VOW) is up by just over 25%. 

Over the next two years, Ford aims to emerge as the clear number two electric vehicle maker in North America, then challenge the number one spot as significant investments in battery and electric vehicle manufacturing come on stream.

Ford already has nearly 200,000 customer reservations for the Lightning truck. Including other models such as its Mustang Mach-E, Ford plans to have the global capacity to produce 600,000 battery electric vehicles annually within two years. 

Japanese auto maker Toyota Motor Corp (NYSE:TM) overtook GM in 2021 to become America's biggest seller of autos at 2.3 million vehicles. Toyota’s stock market value at around $320 billion is second only to Tesla at over $1 trillion. Next comes Volkswagen at around $136 billion, followed by Ford and GM at around $100 billion each. 

Ford’s third-quarter adjusted earnings were better than the second quarter, aided by significant increases in semiconductor availability. Fourth-quarter results are likely to be announced in early February. 

ii view:

Ford employs more than 180,000 people worldwide. Most of its sales (around three-fifths) are made at home in the US. The UK, Germany and Canada also provide major markets, generating sales in 2020 of between 4.5% to 7%. Environmental and climate change concerns have rapidly moved front and centre in strategic thinking and new model planning for the auto industry. The world of self-drive or autonomous vehicles is also in play, with technology giants such as Alphabet and its vehicle Waymo business looking to potentially drive prospects. 

For Ford and its investors, the company previously appeared to be paying the price for sitting on its once formers strengths and not embracing change. The pandemic also added to its challenges, forcing it to suspend the dividend, while microchip shortages for the industry remain ongoing. 

But like many corporations, the pandemic has also accelerated change. Its transformation Ford+ plan for growth and value creation combines existing strengths and new capabilities. The dividend payment has also resumed, if only in a small way. In all, and while there is still much to achieve, a strong brand and decades of experience arguably leave Ford well-positioned in the global auto race.

Positives

  • Action to restructure the business taken
  • Investing in electric vehicle products

Negatives

  • Ongoing industry wide microchip delays
  • Rising inflation could pressure material costs and wages

The average rating of stock market analysts:

Buy

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