Ford's Shift from EVs to Super Duty Trucks

Reasons for Shifting Focus

Ford's shift from EVs to Super Duty Trucks is driven by a focus on cost management, scaling next-generation vehicles, and addressing high pain points in the transition. Increased competition and a strategic pivot towards reliability and long-term planning also play significant roles in this decision.

"So that should help E as we move forward as well. We're very focused on Model E on cost directions in the near term and driving costs out where we can on the models that we have today and really hitting that inflection point, the 2nd generation of vehicles and getting them into the marketplace and then scaling them, both the Skunk Works platform that we'll have, which will be in the smaller, more affordable end plus then the next pickup truck and the 3 row SUV." --- (Ford, conference, 2024/06/11)

"And so that's just continuing to accelerate. And then you have new competitors coming in." --- (F, conference, 2024/06/11)

"If you take the powertrain during this transition and you put it in your businesses, let's say pro and non pro, if we split it that way, I don't think you would have the laser focus in a legacy auto company in getting this fitness level because the pain is so high right now." --- (F, conference, 2024/05/30)

"And so we're not going to change our approach to these launches. We think this new more measured approach with more physical testing, a lot more time for problem solving for our team is the right approach for the company in the midterm and long term." --- (F, earning call, 2024/Q1)

"But seems like the last couple of quarters now, your focus is more on improving the EV business by trying to spend less, not needing to spend more, all right?" --- (F, earning call, 2024/Q1)

Market Demand for Super Duty Trucks

Ford's Super Duty trucks are experiencing robust market demand, with strong sales among Ford Pro customers and significant market shares in sectors like mining, utilities, emergency services, and construction. Despite full production capacity, Ford struggles to meet this high demand, reflected in low retail inventory levels.

"Strong demand for Super Duty among Ford Pro customers Ford is the best-selling pickup truck manufacturer in the U.S. and globally." --- (F, press release, 2024/07/18)

""Super Duty is a vital tool for businesses and people around the world and, even with our Kentucky Truck Plant and Ohio Assembly Plant running flat out, we can't meet the demand." --- (F, press release, 2024/07/18)

"Our planning assumption is for the US is 16 million to 16.5 million units. Full year of customer demand for all-new Super Duty contributing to better market factors for Ford Pro." --- (F, earning call, 2024/Q1)

"Super Duty holds 58% market share in the mining sector, 56% in the utility industry, 53% in emergency vehicles and 44% in construction.1 # # # About Ford Motor Company Ford Motor Company (NYSE:F) is a global company based in Dearborn, Michigan, committed to helping build a better world, where every person is free to move and pursue their dreams." --- (F, press release, 2024/07/18)

"And Super Duty, we have very few in stock for retail. Yeah. So you've got to look at the dealer day supply, and that's in a good place." --- (F, earning call, 2024/Q1)

Challenges in the EV Segment

Ford's EV segment faces significant challenges, with leadership changes aimed at addressing these issues. The Model e is a major drag on the company and the industry, necessitating substantial progress to overcome these hurdles.

"John Lawler, CFO and one of the architects of the Ford+ plan, taking on broader responsibilities as vice chair to help lead on future strategy choices, fully leverage partnerships, and liaise with leaders on industry-critical policy around the globe. Sherry House joining Ford in June with experience across automotive, tech and startups, with plan to become CFO early next year as company drives profitable growth across segments, particularly EVs, software and services. Ford Motor Company today announced senior leadership moves designed to build on significant progress against its Ford+ plan and speed profitable growth through a more resilient business." --- (F, press release, 2024/05/10)

"I appreciate you taking the time to understand the business. Look, I mean, we -- as John mentioned, we have to make tremendous progress on Model e. It's a huge drag not just on Ford but on our whole industry, even for pure-play EV players." --- (F, earning call, 2024/Q1)

Impact on Competitive Positioning

Ford's shift to Super Duty Trucks enhances its competitive positioning by leveraging cost competitiveness and supplier scale. Despite some top-line reductions to stay competitive, Ford's strategic cost actions and established supplier relationships provide a significant advantage over competitors starting from scratch.

"You have no rights to grow unless you're competitive on growth on cost. But that's not the only fitness, but that's the kind of entry ticket." --- (F, conference, 2024/05/30)

"EBIT adjusted was up year-over-year and well above consensus driven by our continued strong ICE performance, improving EV profitability and our strategic cost actions, mitigating the effect of higher labor costs." --- (GM, earning call, 2024/Q1)

"And that's why you saw, to stay competitive with our competitors that had '24 year model pickup trucks, we saw some top line coming down." --- (F, earning call, 2024/Q1)

"So I think we're going to be better positioned and that's just going to continue as we move through this year into next year." --- (GM, earning call, 2024/Q1)

"Now we have really meaningful scale for our suppliers. A lot of our competitors will be starting from scratch." --- (F, earning call, 2024/Q1)

Financial Implications of the Shift

Ford's shift from EVs to Super Duty Trucks could impact its financial structure, potentially altering deferred tax balances and valuation allowances. Additionally, changes in financing margin yield, driven by revenue and interest expense, will be crucial in assessing the financial outcomes of this strategic pivot.

"Any future changes to our structure, as well as any changes in income tax laws in the countries that we operate, could cause increases or decreases to our deferred tax balances and related valuation allowances." --- (F, sec filing, 2024/Q1)

"Financing margin yield equals revenue, less interest expense and scheduled depreciation for the period, divided by average net receivables excluding the allowance for credit losses for the same period. Financing margin changes are driven by changes in revenue and interest expense." --- (F, sec filing, 2024/Q1)

Regulatory and Environmental Considerations

Regulatory uncertainty and upcoming changes in environmental regulations are key factors influencing Ford's strategic shift from EVs to Super Duty Trucks. Competitors like GM and Tesla highlight the impact of regulatory environments on strategic decisions, with steepening regulatory curves and ongoing electrification initiatives shaping industry dynamics.

"Dan Levy: Great. Thank you. And a follow-up, I wanted to ask about your EV strategy, and this is in light of maybe some of the potential changes we may be seeing in the regulatory environment given the upcoming election." --- (GM, earning call, 2024/Q2)

"And according to the company this morning, their decision was driven by uncertainty about the regulatory environment." --- (TSLA, earning call, 2024/Q2)

"But also when you look at the regulatory environment and what's just been approved in the way the curve, 2027 is the year where the curve starts to steepen." --- (GM, conference, 2024/05/30)

"Moreover, we expect to continue to benefit from ongoing electrification of the automotive sector and increasing environmental regulations and initiatives." --- (TSLA, sec filing, 2024/Q1)

Future Strategy: Balancing EVs and Super Duty Trucks

Ford's future strategy involves a balanced approach, continuing to develop and adopt EVs while maintaining profitability through ICE vehicle sales. They are advancing EV design with a new flexible platform and supporting customers transitioning to EV fleets, ensuring a comprehensive and profitable vehicle lineup.

"And so therefore, then they're starting to adopt. And we've had some of our customers have gone now are moving to a full EV fleet or a majority EV fleet given their duty cycles and the cost of ownership is better." --- (F, conference, 2024/06/11)

"Future EVs Design work continues on Ford's future-generation EVs. A skunkworks team in California is developing a smaller, low-cost, profitable, flexible EV platform capable of underpinning multiple vehicles at high volumes." --- (F, press release, 2024/04/04)

"So to continue to sell the ICE vehicles, we are going to need to sell EVs, and we're going to optimize across the profitability." --- (F, earning call, 2024/Q1)