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Ford Motor announced plans for a massive $11.4 bln investment in electric vehicle production. The deal is part of Ford's over $30 billion investment plan in EVs through 2025, the campuses will help $F achieve its goal of EV production reaching 40-50% of the total by 2030

 

Ford Electric

Ford Motor's record-breaking EV Deal

The market was impressed by the announcement with Ford' stock trading at $14.40 +0.24 after the news. with hopes of stronger future growth Ford has gained confidence by rising enthusiasm and demand for its existing and future lineup of electric vehicles.

In Q1 Ford had successful launches of the Mustang Mach-E SUV, all-new 2021 F-150 pickup, and Bronco Sport SUV. Ford believes the all-electric Mustang Mach-E is the first credible mass-marketed competitor to Tesla (TSLA). The Mach-E is expected to entice new customers to Ford  with the knowledge 70% of customers who have purchased the Mach-E thus far are new to Ford.

New CEO Jim Farley has been streamlining operations and reallocating capital to franchise strengths, including pickup trucks, SUVs, commercial vehicles, and iconic passenger vehicles, while phasing out unprofitable sedans. Ford will now invest at least $22 billion in electrification through 2025, nearly twice what Ford had previously committed with the ambitious plan to build massive new EV facilities in Tennessee and Kentucky. The $11.4 bln cost includes a $4.3 billion contribution from South Korea's SK Innovation.

The plan is the largest investment in EVs at any one time by a U.S. based auto manufacturer.  As part of Ford's over $30 billion bln investment plan in EVs through 2025, the construction of these campuses will help the company achieve its goal of EV production reaching 40-50% of the total by 2030.

The $5.6 bln facility in Tennessee has been dubbed "Blue Oval City", will house the production of an expanded lineup of electric F-Series vehicles. Reservations are around 150,000 for the new all-electric F-150 Lightning as of mid-September. The Tennessee campus will have its own battery plant, the bulk of Ford's total battery production will derive from the $5.8 bln Blue Oval SK Battery Park in Kentucky, slated to open in 2025.

Independance From Supply Chain Disruptions

On site will be twin battery plants that are intended to supply Ford's North American assembly plants. The move strengthens Ford from any global headwinds such as the trade war with China, soaring freight costs and pandemic hurdles. Cycle supply independance can't be understated as we have seen with Ford and its rivals are still dealing with significant chip shortages.

On September 1 CNBC reported that Ford once again cut production of its F-150 and Super Duty pickup trucks due to the current supply chain disruption. The new battery plant will significantly lessen Ford's dependence on importing batteries from Asia, providing the company with protection and security from future supply chain issues.

Ford with solid demand and higher pricing for its new SUVs (Bronco and Bronco Sport)F-Series trucks,and EVs has been able to report solid financial results despite the headwinds. In Ford's August sales report it was evident EVs are bringing in new customers at a rate that is eight points higher than Ford's overall conquest rate.

Part of the longer-term strategy is to perpetually recycle EV batteries at the Kentucky plant, thereby eliminating all battery imports which rely on rare earth metals from foreign (and environmentally destructive mines). Ford's bold move represents a viable threat to Tesla (TSLA), which has dominated the U.S. EV market for years and also General Motors (GM).

Source: Ford

From The TradersCommunity Research Desk

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