Stock of the Week: Ford

The legendary pony takes on Tesla and aims for pole position on profitability

Andrew Willis 16 November, 2020 | 4:28AM

 

 

Andrew Willis: With so much attention on electric vehicles lately, it’s easy to forget about the old ‘gasoline’ automakers. But the Teslas of the world have spurred these legacy brands to improve and adapt faster than ever – and this could mean missed opportunities for those writing off the likes of good ol’ Ford.

Now Ford might not be one of the first companies you’d expect to give Tesla a run for their money. However, their finances are much better than they used to be, and gasoline trucks are still very popular, which is helping them move fast on the electric vehicle front.

Recently, Ford has been focused on paying off debt and developing its electric vehicle offerings, while simultaneously reducing costs and increasing scale. The new Mach-E electric mustang is already in production at one factory, with another coming online soon.

Sector strategist David Whiston thinks Ford will eventually turn itself around, but when that happens is still uncertain. There are also concerns about the company’s moat – or sustainable competitive advantage, since vehicle manufacturing is a very capital-intensive business but barriers to entry aren’t as high as they used to be.

That said, competitors will have to face the reality that 75% of new light-vehicle sales in the U.S. still comprise of light trucks – which is Ford’s wheelhouse. And while it will be expensive to transition old production lines to make electric vehicles, Ford may be also able to take advantage of existing investments to produce an electric vehicle that is profitable from the start.

For Morningstar, I’m Andrew Willis.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Ford Motor Co9.34 USD1.41
Tesla Inc599.04 USD0.95

About Author

Andrew Willis

Andrew Willis  is Content Editor for Morningstar.ca. Follow him on Twitter @AndrewWillisCDN.

 

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