Is Ford Stock Hitting the Gas as Lockdowns Ease?
The coronavirus pandemic forced the entire auto industry to put on the brakes. Things are coming back slowly, but experts say a full rebound will take time.
A new Bank of America report predicts that 12.8 million new vehicles will be sold in the United States this year, a decline of 25% from last year. And it could be several years before sales get anywhere close to 2019 levels, the bank said.
Despite the pessimism, Ford Motor Co. (NYSE: F) is making a bullish case for its future. Company executives explained why they’re optimistic at the Deutsche Bank Global Auto Industry Conference, held online last week.
Ford stock is down 30% year to date, compared with the S&P 500, which declined 5% in the same period. Fifteen stock market analysts following the company have set a price target of $7.81.
The stock closed at $6.50 Monday, and Ford has four Buy ratings, nine Hold and two Sell. Bank of America recently included Ford on its list of 5 stocks under $10 with upside potential.
Execs Make Their Case
At the auto conference, CEO Jim Hackett said the company built by Henry Ford is deploying data, artificial intelligence and electric vehicles to take the storied automaker into the future. The effort to connect vehicles to the “internet of things” is a major initiative at Ford, Hackett said.
Connecting all vehicles to the internet, as Tesla has done, gives automakers new abilities to compile data and even update car software remotely. General Motors’ OnStar service is another example of an internet of things application.
Going forward, Ford is devoting more resources to its most profitable lines: trucks, utilities and commercial vehicles. The company is de-emphasizing its less profitable sedan business. Ford says it is the No. 1 commercial vehicle manufacturer in Europe, so it restructured there to focus on that sector.
Again, connected vehicles are a long-term theme. In the commercial vehicle space, “connected services are lowering the cost of ownership, while improving asset management which are critically important to our fleet customers,” said Jim Farley, Ford’s chief operating officer.
For commercial buyers, Ford offers fleet management, fuel monitoring and fraud detection services. Ford will also have a fully electric version of its Transit cargo van within the next 24 months.
New vehicles including the Mustang Mach-E, a redesigned F-150 and a new Bronco, are also a big part of Ford’s strategy. These lines “are integral to driving down the average age of our showroom in the US from 5.3 years in 2017 to a more competitive level of 3.2 years,” Hackett said.
After a 24-year absence, Ford is bringing the Bronco back. The company just confirmed the new vehicle will launch July 9, which coincidentally is O.J. Simpson’s birthday. The former NFL star notoriously tried to flee police in a white Ford Bronco back in 1994.
“Our all new Bronco is the epitome of what we’re calling human-centered design,” Hackett said. “Imagine trying to watch a baseball game or concert with your view obstructed by a pole from where you sit. Well, that’s what it’s like when you’re seated in a competitor’s vehicle. In contrast, the root design of our new Bronco features uninterrupted panoramic views … We call it open-air.”
The new Bronco has “big upside potential in the growing off-road category,” Farley added.
The new F-150 pickup trucks launch June 25. There’s a lot riding on the F-150, the best-selling truck in America for 43 years. The first electric version of the truck is expected by 2022.
Overall, Ford says it is returning to pre-pandemic production levels. The company expects all of its U.S. plants to be operating at full capacity by July 6. Last week, Ford and General Motors (NYSE: GM) said they were cancelling previously scheduled summer breaks to make up for the time when their plants were idle.
In terms of dealerships, Ford thinks the move to online buying will continue after the pandemic ends. “72% of our dealers in North America now offer online sales, and about 25% of our sales are online now,” Farley said. In the U.S., Ford said May retail sales increased 44% over April.
In partnerships, Ford recently revealed new details of its deal with Volkswagen. The two companies are cooperating on several projects, including a new city delivery van that may be available by next year.
Also in the works is a new medium-sized truck that will be marketed as the Volkswagen Amarok. And a Ford electric car is expected for Europe by 2023.
In India, Ford remains optimistic about its alliance with Mahindra, one of the country’s biggest automakers. Signed in October 2019, the joint venture is working on several Ford-branded SUVs to be sold in India. It’s a massive consumer market, though the economy is struggling mightily right now.