Investing

Tuesday Premarket Newsmakers: Ford Puts a Charge Into Tesla Stock

Paul Ausick

Published: May 23, 2023 7:40 am

Premarket action on Tuesday had the three major U.S. indexes trading lower. The Dow Jones industrials were down 0.13%, the S&P 500 down 0.11% and the Nasdaq 0.11% lower.

At the Ford Motor Co. (NYSE: F) investor day on Monday, CEO Jim Farley said he believes the company has a plan in place to become a big deal in the electric vehicle (EV) space. The plan is reminiscent of a baseball team’s manager’s advice to batters: hit it where they ain’t.

Morgan Stanley auto industry analyst Adam Jonas noted that going head to head with Tesla Inc. (NASDAQ: TSLA) and China’s BYD is a good way to burn through billions of dollars in cash over a multiyear period. Farley said Ford is not competing with either Tesla or BYD, the two largest sellers of EVs because the venerable Detroit automaker is targeting segments that neither Tesla nor BYD addresses.

Segments like a three-row sport utility vehicle or crossover EV. Maybe the reason Tesla and BYD are avoiding the large SUV segment is because that’s not where the money is. Both are looking at a mass market for EVs costing less than $30,000, and Ford is going to avoid commoditization of its EVs by taking the high-priced road. But that is what Lucid, Rivian and Lordstown, are trying to do, not to mention Mercedes, BMW and Volvo. High-end buyers have a lot of choices already; it is hard to see how adding a three-row seat configuration is going to be a big seller.

As if to underscore Ford’s commitment to EVs, the company also announced three agreements with lithium producers to supply the lithium carbonate and lithium hydroxide required for EV batteries. Sociedad Química y Minera de Chile S.A. (NYSE: SQM) announced a long-term strategic deal and Albemarle Corp. (NYSE: ALB) announced a five-year supply deal beginning in 2026 for 100,000 metric tons of battery-grade lithium hydroxide. On May 18, one metric ton of lithium hydroxide traded at $45,000. Lithium carbonate trades at around $35,000 per metric ton.

In her investor day presentation, Ford EV executive Lisa Drake said the company produced nearly 100,000 model e units last year and that capacity for the EVs will reach 1 million by the end of 2026. The company has sourced 90% of its nickel requirements and 90% of its lithium requirements to reach global EV production capacity of 2 million units.

Ford’s presentation probably had something to do with Tesla’s impressive share price jump of 4.9% on Monday. Ford stock closed down 0.2%.

Half an hour after U.S. markets open on Tuesday, the Census Bureau will release its monthly report on new home sales. In March, total new home sales rose 9.6% month over month to a seasonally adjusted annual rate of 683,000. That was the highest rate in five months but still down 3.4% year over year. Economists expect the April rate to fall to a seasonally adjusted annual total of 660,000. That would be the second-highest total in any month since March 2022.

Here is a look at how the markets fared on Monday.

24/7 Wall St.
Grab These 5 ‘Strong Buy’ Blue Chips Before They Raise Their Dividends This Week

Six of 11 market sectors closed higher on Monday. Communications services (1.17%) and real estate (0.67%) had the day’s best gains. Consumer staples (−1.47%) and materials (−0.55%) posted the biggest losses. Industrials closed unchanged. The Dow closed down 0.42%, the S&P 500 up 0.02% and the Nasdaq up 0.50% on Monday.

Two-year Treasuries added one basis point to end Monday at 4.29%, and 10-year notes rose by two basis points to close at 3.72%. In Tuesday’s premarket, two-year notes were trading at around 4.38% and 10-year notes at about 3.75%.

The next big economic data point comes before markets open Thursday, when the second estimate of first-quarter gross domestic product is released. The report on personal consumption and expenditures is due Friday.