Ford (NYSE: F) recently announced a significant change in strategy by pivoting away from plans for a three-row electric SUV and opting to introduce it as a hybrid instead. This decision underscores a broader strategic shift within the company, reallocating resources towards hybrids while stepping back from emphasizing electric vehicles (EVs).
Despite incurring costs for these changes, I predict that this strategic shift will prove beneficial for Ford in the long run.
Strategic Realignments
Alongside the decision to alter plans for the three-row electric SUV, Ford unveiled several other pivotal changes. The company announced a delay in the release of the F-150 Lightning’s successor to 2027, with plans to commence production of a new electric van targeting tradespeople and commercial users by 2026. Additionally, Ford intends to roll out a medium-sized electric pickup in 2026 and relocate battery production from Poland to Michigan to leverage tax credits.
Ford anticipates a $400 million non-cash writedown on the abandoned electric SUV and expects additional expenses, including capital expenditures (capex) totaling $1.5 billion. The company intends to decrease its pure EV-focused capex from the planned 40% to 30%, highlighting the rising demand for hybrids as a driving factor behind this decision. Ford further pledged to refrain from introducing any new EV models unless they demonstrate the potential to generate positive EBIT (earnings before interest and taxes) within the initial 12 months post-launch.
Image source: Getty Images.
Shifting Dynamics: From EVs to Hybrids
The timing of Ford’s announcement aligns with a period of decelerating growth in EV sales and escalating competition within the sector. Despite the record 11% increase in EV sales in the U.S. during the second quarter, the pace significantly slowed compared to the over 50% growth witnessed last year.
The introduction of numerous EV models by various companies has precipitated notable discounting tactics. For instance, the new Kia EV9 recorded an average $18,000 discount below MSRP in June. To provide context, the typical customer offer for popular hybrid versions of the 2025 Kia Sportage listed by lead-generation platform TrueCar exceeded the MSRP.
Consumer reservations towards EVs stem from concerns about battery longevity and replacement costs. While EV batteries typically have lengthy lifespans and robust warranties, the exorbitant cost of replacement remains a deterrent.
Replacing the battery of a Chevrolet Bolt can cost between $17,000 and $19,000, including labor, while a Tesla Model 3 battery replacement falls in the $15,000 to $18,000 range. These factors contribute to substantial depreciation of EVs and raise anxieties among buyers regarding potential expenses outweighing the vehicle’s value.
Moreover, inadequate access to charging infrastructure poses a challenge for potential EV buyers, particularly those residing in multi-unit dwellings where home charging is impractical. Concerns about long-distance travel and potential power depletion also deter many from adopting EVs.
Hybrids address several of these apprehensions, as they do not necessitate charging for non-plug-in variants, utilize regenerative braking for energy, consume gasoline for extended journeys, and feature smaller, more affordable batteries.
Conversely, hybrid sales have surged, with hybrid sales climbing 41% and plug-in hybrid sales skyrocketing by 49%.
Enhanced Attractiveness of Ford Stock
From my perspective, Ford’s strategic pivot towards hybrid vehicles is a well-calculated move. While EVs will remain within the company’s portfolio, the emphasis will likely be on segments where Ford holds dominant positions, such as pick-up trucks.
Consumer preferences currently favor hybrids, reflecting a continued trend likely to persist due to their cost-saving benefits and alleviation of EV-related concerns and obstacles. Consequently, realigning its strategy is expected to position Ford favorably in the long term.
Presently, Ford boasts a forward price-to-earnings (P/E) ratio slightly above 5.7 and an enterprise value-to-EBITDA multiple of 11 times, representing a premium over rival General Motors (NYSE: GM), likely attributed to GM’s substantial exposure in the Chinese market.
F PE Ratio (Forward 1y) data by YCharts.
Overall, Ford’s strategic transition away from EVs, where losses accumulated, towards hybrids represents a shrewd move. This step underscores Ford’s sharpened focus, assuring investors of its departure from unprofitable ventures.
While challenges lay ahead, Ford’s recent strategic shift positions it as a more appealing long-term investment compared to its previous standing.
Should You Consider Investing in Ford Motor Company?
Before pondering an investment in Ford Motor Company…
The Motley Fool Stock Advisor analyst team has recently identified what they consider…
The Astonishing Success of Stock Advisor’s Top Picks
Steering Clear of Ford, But Finding Treasure Elsewhere
When it comes to lucrative stock investments, Stock Advisor has proven time and time again that Ford Motor Company isn’t always the golden ticket. The recent revelation of the “10 Best Stocks for Investors to Buy Now” list just reaffirms this sentiment. However, the selection of stocks that did make the cut is nothing short of a hidden treasure trove, poised to potentially yield massive returns over the years to come.
The Nvidia Phenomenon: A Historic Lesson in Stock Market Success
Consider, for instance, the case of Nvidia, which first appeared on this illustrious list back on April 15, 2005. A mere $1,000 invested at the time of Stock Advisor‘s recommendation would have effortlessly blossomed into a staggering $786,169. An eye-watering return that acts as a beacon of hope for investors seeking substantial growth opportunities in the market. This success story of Nvidia serves as a timeless reminder of the vast potential embedded within the top picks of Stock Advisor.
Outperforming the Benchmark: A Record of Consistent Overachievement
Since its inception, Stock Advisor has been dedicated to providing investors with a roadmap to success that is both easily understandable and exceptionally rewarding. By offering invaluable guidance on portfolio construction, regular insights from seasoned analysts, and two fresh stock picks every month, the Stock Advisor service has managed to not just outperform but completely dominate the S&P 500 index since 2002. The return on investment provided by Stock Advisor has soared to more than quadruple that of the S&P 500, showcasing a consistent track record of overachievement that speaks volumes about the caliber of stocks recommended.
Looking Ahead: Unveiling the Next Potential Blockbusters
For investors eager to discover the next batch of potential blockbusters similar to Nvidia, the “10 Best Stocks for Investors to Buy Now” list by Stock Advisor promises a glimpse into the future. With a history of identifying hidden gems that have the capacity to skyrocket and reshape portfolios, Stock Advisor is a beacon of hope in an ever-evolving market landscape.
Unlocking Opportunities for Growth
As Stock Advisor continues to unveil its top picks and guide investors towards prosperous endeavors, the allure of staggering returns and transformative financial growth beckons. The success stories of previously recommended stocks serve as a testament to the insightful analysis and groundbreaking foresight provided by Stock Advisor, creating a roadmap towards unlocking opportunities for substantial growth in the market.
Embracing a Path of Financial Prosperity
With each new revelation of the “10 Best Stocks for Investors to Buy Now” list, investors are presented with a golden opportunity to embark on a journey towards financial prosperity. By following the sage advice and strategic recommendations bestowed by Stock Advisor, individuals can navigate the complex landscape of the stock market with confidence and clarity, paving the way for a future brimming with potential and promise.
