Connect with us

Business News

General Motors’ China business is hurting, and it’s not just because of Covid

Published

on

A worker checks the quality of a vehicle before rolling off the assembly line at the production workshop of SAIC General Motors Wuling in Qingdao, East China’s Shandong province, Jan. 28, 2023. (Photo credit should read

CFOTO | Future Publishing | Getty Images

General Motors is losing ground in China, its top sales market for more than a decade and one of two main profit engines for the Detroit automaker.

The company’s market share in the country, including its joint ventures, has plummeted from roughly 15% in 2015 to 9.8% last year — the first time it has dropped below 10% since 2004. Its earnings from the operations also have fallen by nearly 70% since peaking in 2014.

The coronavirus pandemic, which originated in China, is partially to blame. However, the declines started years before the global health crisis and are growing increasingly more complex amid rising economic and political tensions between the U.S. and China.

There’s also growing competition from government-backed domestic automakers fueled by nationalism and a generational shift in consumer perceptions regarding the automotive industry and electric vehicles.

Take, for example, Will Sundin, a 34-year-old science teacher who told CNBC he never envisioned buying a Chinese-branded vehicle when he moved to the country in 2011. More recently Sundin purchased a Nio ET7 electric vehicle as his daily driver in Changsha, the capital city of China’s Hunan Province.

“I wanted something big and comfortable, but I also wanted something that was a bit quick,” he said. “I like the look of it.”

Sundin, who moonlights as a YouTube car reviewer, knows the Chinese vehicle industry well. He purchased his Nio over models from rival Chinese automakers Xpeng, Li Auto and IM Motors. He said the vehicle’s ability to swap out the battery for a fresh one, rather than recharging, “put it ahead pretty quickly.”

Not on his consideration list? American brands such as GM’s Cadillac and Buick, which initially led the automaker’s growth in China.

“Cadillac has a good image in China, but it’s expensive,” said Sundin, who previously owned a 2012 Ford Focus. “I think the problem they face is that they have competition, new competition, a lot of new competition, from different directions that they weren’t expecting.”

Will Sundin, who lives in Changsha and is standing in front of his new Nio ET7 electric vehicle.

Source: Will Sundin

That competition is increasingly becoming a problem for GM, which has acknowledged such issues with its Chinese business. However, the company has not offered much assurance on how to reverse the trend other than the promise of new EVs and a new business unit called The Durant Guild that will import pricy vehicles with high margins from the U.S. to China.

While many U.S. brands aren’t performing well in China, GM’s decline is especially notable. GM’s operations in the country are much larger than those of its crosstown rival Ford Motor, for example. It also has a much smaller footprint globally after shedding its European operations and shuttering operations elsewhere to largely focus on North America, China and, to a lesser extent, South America.

Being overly reliant on only a few markets can be risky. But it has led to record earnings for GM, as the company under CEO Mary Barra has done away with underperforming operations. Electric vehicles could be a new opportunity for GM to grow globally, but experts say it would be an uphill battle compared with recovering in China in the years to come.

“With the changes that they put in place, with a refocus on North America and China, the pull out of Europe, essentially, that does create a risky scenario now that you have some issues, multiple issues, going on in the Chinese market,” said Jeff Schuster, executive vice president of LMC Automotive, a GlobalData company.

Downplaying results

GM has been downplaying the role of its operations in China in recent quarters, including CFO Paul Jacobson saying China is “not decisive” to GM’s financial performance when he discussed earnings in October.

Barra said in December that China is an important part of GM’s business but that the company also is paying attention to other issues, which then included the government’s now-defunct “zero Covid” policy and recent protests.

“We still see opportunity there … obviously, we also watch the geopolitical situation. We can’t operate in a vacuum,” she said during an Automotive Press Association meeting. “But we continue to see opportunity there and we’ll continue to evaluate the situation, but our plans are to be in a leadership position in EVs.”

A bright spot for GM in China has been its Wuling Hongguang Mini, made by a joint venture, which is the bestselling EV in the market. Since going on sale in mid-2020, the economy car has sold more than 1 million units.

SAIC-GM-Wuling Automobile Co. electric vehicles are plugged in at charging stations at a roadside parking lot in Liuzhou, China, on Monday, May 17, 2021.

Qilai Shen | Bloomberg | Getty Images

Still, Jacobson earlier this year said China’s handling of the coronavirus pandemic and surging Covid cases accounted for the nearly 40% drop in equity income for the operations in 2022.

GM reports its earnings from China as equity income because the country mandates joint ventures for non-Chinese automakers — other than Tesla, which was granted an exemption. GM has 10 joint ventures, two wholly owned foreign enterprises and more than 58,000 employees in China. Its brands include Cadillac, Buick, Chevrolet, Wuling and Baojun.

“We see a lot of Covid cases in China right now that slowed down the consumer. So we expect it’ll be a little bit of a slow buildup but hopefully, working its way back up to levels that we’re used to over time,” he told reporters on Jan. 31 during an earnings call.

Not just Covid

But it’s not just related to the pandemic. Equity income from GM’s Chinese operations and joint ventures has fallen 67% since its peak of more than $2 billion in 2014 and 2015. That includes a decline of about 45% from then to 2019 — prior to the coronavirus crippling China’s economy and vehicle production. In 2022, GM’s Chinese operations garnered equity income of $677 million for GM.

“This is not Covid. This started well before Covid,” Michael Dunne, CEO of ZoZo Go, a consulting firm focused on China, electrification and autonomous vehicles. “It also coincides with escalating tensions between the United States and China. There’s no question, and it’s impossible to measure, but it’s definitely a factor.”

Dunne, president of GM’s Indonesia operations from 2013-15, said the decline of GM and other nondomestic automakers comes alongside China’s market growth slowing, Chinese automakers becoming increasingly more competitive and the shift to all-electric vehicles — which has been massively subsidized by government agencies.

“They’ve all really taken it on the chin in the last five years as middle market brands. The Chinese consumers are increasingly buying Chinese brands,” he said. “That’s a seismic shift … the mindset has changed.”

Employees work on the assembly line of Buick Envision SUV at a workshop of GM Dong Yue assembly plant, officially known as SAIC-GM Dong Yue Motors Co., Ltd on November 17, 2022 in Yantai, Shandong Province of China.

Tang Ke | Visual China Group | Getty Images

Domestic startups and automakers have helped Beijing realize its goal of boosting penetration of new energy vehicles — a category that includes electric cars. More than one-fourth of passenger cars sold in China last year were new energy vehicles, according to the China Passenger Car Association, which predicts penetration will reach 36% this year.

Local companies rushed to grab a slice of that growth in an auto market that was slumping overall. Startups such as Nio helped promote the idea of electric vehicles as part of an aspirational lifestyle and status symbol in China. And the rising quality of domestic-made electric vehicles helped support — and tap — growing nationalistic pride among China’s consumers.

Chinese brands have grown market share by 21% since 2015 to roughly half of all passenger vehicles sold in China last year, according to the China Association of Automobile Manufacturers. For comparison, sales of American brands in the U.S. during that time have been level at about 45%.

“Obviously the market has just been in a different place; a lot of it is policy-driven,” Schuster said.

The impact of Chinese nationalism

LMC Automotive reports Chinese companies accounted for half of the top 10 automakers in sales in the country last year, up from only three in 2015. The most notable is BYD Auto, an electric automaker that has skyrocketed from sales of roughly 445,000 units since then to nearly 2 million last year, making it one of the top five automakers by sales in China.

“I think the No. 1 reason for GM’s decline is this tilt toward Chinese nationalism,” Dunne said. “That takes the form of China has declared that it wants to be the global dominator in electric vehicles and it’s doing everything in his power to cultivate national champions like BYD.”

Aside from GM, America’s other legacy automakers — Ford and Chrysler-descendent Stellantis — have not fared much better. Both have experienced significant downturns in sales; however, neither has communicated any plans on giving up on the market.

In February, Ford named Sam Wu, a former Whirlpool executive who joined the automaker in October, as president and chief executive of its China operations, starting March 1.

Ford’s market share in China has been about 2% since 2019, down from 4.8% in 2015 and 2016, according to the company’s annual filings.

Ford’s problems in China aren’t just overseas. The company said in February it will collaborate with Chinese supplier CATL on a new $3.5 billion battery plant for electric vehicles in Michigan. The deal has been criticized by some Republicans, including Sen. Marco Rubio of Florida, who requested the Biden administration review Ford’s deal to license technology from CATL.

Ford CEO Jim Farley on Feb. 13, 2023 at a battery lab for the automaker in suburban Detroit, announcing a new $3.5 billion EV battery plant in the state to produce lithium iron phosphate batteries, or LFP, batteries.

Michael Wayland/CNBC

The joint venture between Stellantis and Guangzhou Automobile Group producing Jeep vehicles in China filed for bankruptcy in late 2022 following a decision to dissolve the partnership and import its SUVs into the country.

Stellantis CEO Carlos Tavares has said the company is pursuing an “asset-light” approach in the country, focused on boosting profits and not necessarily sales, which declined 7% in 2022.

“It’s also important that you realize that our financials in China have been improving significantly,” he told reporters during a call last month, saying the company is “cleaning up the place.”

While the American-focused automakers regroup, China’s local automakers continue to gain ground in their home market.

“People in China are proud,” said Nio owner Sundin.

“The same way as ‘American Made’ is in the USA and all the patriotism behind that, in China, [it’s] the same thing: ‘Finally, we can make a phone or we can make a car that’s as good or better than foreign automakers.'”

— CNBC’s Evelyn Cheng contributed to this report.

Business News

Secondhand resale is getting cutthroat as platforms such as Depop and Poshmark boom

Published

on

The Depop application on a smartphone arranged on Wednesday, June 2, 2021.

Gabby Jones | Bloomberg | Getty Images

Six months after launching his secondhand clothing shop on digital marketplace Depop in 2020, Blake Robertson, a 15-year-old high schooler at the time, received a death threat from a customer.

It came via Instagram, from someone who had not received her purchase in time for Christmas.  

“Nothing happened, but I don’t know, it just opened my eyes to the fact that some people, they just really want their items,” said Robertson.

Demand for secondhand resale online has been booming since the early days of the pandemic, generating a culture shift within the indie marketplaces where it began. Customers, many of whom have been feeling the squeeze of inflation, are fiending for lower prices, leading to more heated negotiations and occasionally ruthless bidding wars.

Meanwhile, independent resellers are turning their onetime hobby into a job, sometimes even upselling items to take advantage of demand spikes. Users on platforms such as Depop and Poshmark set up online shops to list vintage, secondhand or unique items for sale and generate notable followings of loyal shoppers.

Robertson is now 17 and says the growth of resale has allowed him to turn his Depop shop, which now has more than 19,000 followers, into a part-time gig. He told CNBC he juggles the hustle of reselling with his high school studies.

Blake Robertson, 17, poses with his closet, some of which is up for resale on his Depop shop.

Courtesy: Blake Robertson

He’s become accustomed to the occasional hate message or dayslong negotiations over a single item. More than anything, he has been pleasantly surprised by the growing reach of his shop, which used to just serve his friends as patrons.

“I get these messages from total and complete strangers, which just makes me think how much this app genuinely has grown,” Robertson said.

The back-and-forth

To be sure, death threats against resellers are not the norm. Beaux Abington, 49, says that overall, she’s had “really fantastic, phenomenal customers.”

But she’s also noticed more buyers hunting deals and has felt insulted by recent offers for her products that are sometimes less than half her asking price.

“There’s definitely a price-consciousness that wasn’t always there,” said Abington.

About 53% of people polled in an October 2022 Depop survey of more than 2,000 U.K. consumers said that they have been turning to secondhand shopping more in order to save money as living costs rise. The result, sellers say, is more frequent negotiations and intensified bidding wars.

“There’s a lot more negotiation happening. Even in the last year, I’d say it’s kind of skyrocketed for me,” said Josefina Munroe, 27, a Depop seller with more than 30,000 followers. She started her shop five years ago and decided to make it a full-time job after she graduated college in 2020 and demand for online resale expanded.

Then there are the de facto bidding wars. Munroe recalls purchasing an item on Depop only to have the seller cancel her order after realizing that another customer was willing to pay more. Other Depop shoppers say that is not an uncommon experience.

“It’s completely separate from real-world shopping because that would never happen in a store,” said Munroe. “I think people have gotten very comfortable with the whole back-and-forth.”

Beaux Abington, 49, models some of her own Depop items.

Courtesy: Beaux Abington

Platforms such as Depop and Poshmark are leaning into the competitive consumer zeitgeist.

Last January, Depop launched a new “Make Offer” option — a feature that has streamlined the negotiation process, which used to take place informally via direct messages. Resellers say that the new button has made customers more comfortable haggling.

“The offer feature on Depop has definitely created a new dynamic in terms of being hounded with low-ballers and also being expected to sell things cheaply,” said Pascale Davies, 28, who runs a Depop shop with 59,000 followers.

But Depop has yet to institute a formal function for bidding battles — like the original online reseller, eBay, offers. Depop also shut down comment sections on product pages where customers used to ask questions and sometimes get in arguments, according to users.

“We found that comments on an item did not directly help buyers with their decision-making,” a Depop spokesperson told CNBC when asked about the change.

Going bigger

In September, Poshmark launched “Posh Shows,” which allows sellers to hold livestreamed auctions to sell and promote their inventory.

Stephanie Dionne, 44, who has been selling on Poshmark for about two years, said the live shows are “all kinds of crazy and chaotic,” generating a fast-paced, ruthless selling environment.

“When it comes to the live shows, people will kind of steal it out from under you at the last second,” she said.

Since she launched her secondhand market with her two sisters, Dionne’s business keeps getting bigger and bigger — so much so that one of her sisters reduced her full-time day job to part-time in order to focus on the Poshmark shop.

Last year, the Dionnes made between $4,000 and $5,000 in profit. Just a couple months into this year, they have already surpassed that.

But now, sellers such as the Dionnes are not only competing with Poshmark and Depop peers but also major retailers such as Target and H&M that are trying to cash in on the resale boom.

Last week, H&M announced its most recent collaboration with the online thrift store ThredUp, which will now cross-list about 30,000 pieces of secondhand clothing on H&M’s website. Target has launched several ThredUp partnerships of its own, and Etsy bought Depop in 2021. In January, Poshmark was acquired by South Korean web giant Naver.

But some independent resellers doubt that the unique, curated experience of indie resale can be scaled.

“Although bigger companies are trying to occupy this space, I think they miss the mark when it comes to the personal element of vintage,” Finn Thomas, a London-based Depop seller, told CNBC.

“Part of the charm of buying vintage is the one-on-one interaction between the buyer and seller, the unique story behind each piece and the general curation behind a store, something I can’t see the larger companies like H&M achieving,” Thomas added.

Continue Reading

Business News

How Ford plans to turn a profit on EVs in under four years

Published

on

John Lawler, Chief Financial Officer of Ford, rings the opening bell at the New York Stock Exchange (NYSE), March 23, 2023.

Brendan McDermid | Reuters

Ford Motor disclosed Thursday that its electric vehicle unit, called Ford Model e, lost $2.1 billion in 2022 — and could lose as much as $3 billion in 2023.

But the company also forecast a drastic turnaround, reiterating that it expects its EV business to be solidly profitable by the end of 2026. So how will it pull that off?

The automaker’s answer started with a single slide it presented during a “teach-in” for analysts and investors in New York on Thursday.

On an earnings before interest and tax, or EBIT, basis, Ford Model e had a profit margin of roughly negative 40% in 2022, it said. Ford is targeting a positive EBIT margin of 8% for the unit by the end of 2026.

“We’re already seeing green shoots of the improvements in the profitability of Model e,” Ford CFO John Lawler said Thursday during the investor event. “From a contribution margin perspective, we expect Model e to approach breakeven at the end of this year, and, in 2024, we believe our first generation products can be EBIT margin positive.”

But Model e as a whole won’t be profitable for a while yet, Lawler said, because of the heavy investments Ford will be making to scale up production and roll out more new EV models. Here, step by step, is how Lawler said Ford expects Model e to get to a positive 8% EBIT profit margin in under four years:

  • Scale. Simply put, building more EVs and allowing the supply chain to mature will yield greater economies of scale. Ford expects to have the capacity to build EVs at a rate of 2 million per year by the end of 2026. That alone will provide roughly 20 points of margin improvement, according to Ford’s projections.
  • Design and Engineering. Lawler said Ford is “obsessing over energy efficient designs because they will allow us to significantly reduce the battery size and cost.” He said such designs will lead to “ultra-high simplicity of manufacturing and platforms that maximize commonality and reuse,” which will yield another 15 points of margin improvement.
  • Battery. While costs have come down, batteries are still the most expensive part of an EV, especially if the automaker is buying them from third-party manufacturers, as Ford has been. To make matters worse, or at least more costly, Ford’s EVs have so far used relatively expensive lithium-ion cells, rather than the cheaper lithium iron phosphate, or LFP, cells used by Tesla in its less expensive models. Ford’s plan to bring those costs down further centers on bringing battery-cell manufacturing in house, either directly or via joint ventures with battery makers. In addition, it will soon begin offering LFP as a lower-cost option on some of its EVs — starting later this year with cells bought from Chinese battery giant CATL, and from a new Michigan factory that will come online in 2026. As those efforts scale up, Ford expects to gain another 10 points of margin improvement.
  • Other. Ford also expects to find incremental gains by selling software and services, such as driver-assistance system BlueCruise, to EV owners, via benefits in the Inflation Reduction Act, via improvements in raw materials costs, and with other tweaks here and there. But pricing — specifically, the need to stay competitive with a fast-growing number of EV rivals — may offset all of that to some extent. Ford thinks the upshot will be about 3 points of margin gain, just enough to bring it to that targeted positive 8% by the end of 2026 — if all goes according to plan.

Not all of those margin gains will take years to materialize. Lawler said that Ford thinks it can still reduce the costs of making its current first-generation EVs — the Mustang Mach-E crossover, F-150 Lightning pickup and E-Transit van — by incorporating lessons it’s learning as it engineers its second-generation models, which are due to launch over the next few years.

Despite the considerable detail that Ford provided Thursday, some Wall Street analysts are still skeptical that Ford can achieve an 8% EBIT margin on EVs by 2026.

“We believe investors are likely to remain skeptical on the path to appropriate margins, especially amid inflationary headwinds and price declines,” Barclays’ Dan Levy said in a note following the event.

Wells Fargo analyst Colin Langan shared similar thoughts in an investor note Thursday morning: “It’s unclear how Ford expects to get to its 8% 2026 target margin for Model e” as long as sales expectations remain the same.

Part of that near-term help may come from the Inflation Reduction Act, which provides company-level credits for making batteries and vehicles in North America, as Ford plans to do with the EVs it sells here. But as Deutsche Bank analyst Emmanuel Rosner pointed out Thursday, Ford’s 8% margin goal was announced “well before IRA.” That means any benefit realized from the legislation should be in addition to that goal, he said in an investor note during Ford’s presentation.

Rosner, prior to Thursday’s event, called the 8% margin target “especially optimistic” when compared with crosstown rival General Motors, which is only targeting low- to mid-single digit margins on its EV business by 2026, excluding any IRA benefits.

Lawler said the company will provide more details on Model e’s path to profitability during Ford’s annual capital markets day on May 22.

“We are laser-focused on building an industry leading portfolio of highly differentiated EVs that inspire our customers and play to Ford’s strengths in pickup trucks, vans and SUVs,” Lawler said.

Continue Reading

Business News

Ford is about to break out big EV losses for the first time

Published

on

Incoming Ford CEO Jim Farley (left) and Ford Executive Chairman Bill Ford Jr. pose with a 2021 F-150 during an event Sept. 17, 2020 at the company’s Michigan plant that produces the pickup.

Michael Wayland | CNBC

DETROIT – Ford Motor is about to tell investors what they’ve long wondered: How much is the transition to electric vehicles costing?

The automaker on Thursday plans to begin reporting its financial results by business unit, instead of by region, ushering in the new reporting structure with a “teach-in” for analysts and media — on the theme of “Ford Refounded” — and releasing revised versions of its financial results that will reveal how the new business units would have performed in 2021 and 2022.

Those new business units include “Ford Blue,” Ford’s traditional internal combustion engine business; its “Model e” electric vehicle unit; the “Ford Pro” commercial and government fleet business; “Ford Next,” which includes nonautomotive mobility solutions and other future tech; and its existing Ford Credit financial services subsidiary.

The changes amount to the most detailed look yet by any legacy automaker into the finances behind the EV business.

The carmaker is expected to release profits and losses, revenue, margins and earnings before interest and taxes, or EBIT, for each of the units – giving investors and analysts a baseline for comparisons as the company’s transformation unfolds.

As part of a sweeping rethink of its business under CEO Jim Farley, Ford decided last year to separate its primary profit engines – internal combustion vehicles and its commercial fleet business – from the company’s emerging all-electric vehicles, which are not expected to be profitable for at least a few years.

Farley and other executives have emphasized that the reporting changes aren’t just about disclosure: The new format reflects the way Ford’s executive team thinks about and runs the business.

“The changes are significant. It’s not the first time Ford Motor Co. has had to reimagine its future or form its own path that’s different from other companies,” Farley said when announcing the new business units on March 2, 2022. “Is this about winning? 100%.”

Wall Street is taking a wait-and-see approach to the changes. Analysts on average maintain a hold rating on the stock with a $13.50 price target, according to ratings compiled by FactSet. The shares traded Wednesday for about $11.70 per share.

Shares of Ford jumped by 8.4% the day executives announced the new businesses, but the stock is down 35% since then, dragged lower by changing market conditions, supply chain issues and underwhelming quarterly earnings.

The company will report its first-quarter results under the new format on May 2 and will host a capital markets day on May 22.

EV losses

Farley argued last year that Ford’s stand-alone EV business will “produce as much excitement as any pure EV competitor, but with scale and resources that no start-up could ever match.”

Still, he described the legacy business as “a profit and cash engine” for the 120-year-old automaker. As with other automakers and EV startups, investors should expect deep losses when it comes to Ford’s electric vehicle business, according to Wall Street analysts.

Model e is expected to include the company’s EV platforms, electronics, batteries, motors, and embedded software and digital experience.

Morgan Stanley’s Adam Jonas expects Ford Model e to have negative gross margins of between 10% and 20% with adjusted EBIT margins of between negative 20% and negative 30%. Both would imply significant losses.

Ford has said it expects 8% margins on its EVs — along with 2 million units in annual production of the vehicles — by 2026, helping to boost its overall adjusted profit margins to 10%. The company’s adjusted profit margin last year was 6.6%.

Deutsche Bank analyst Emmanuel Rosner believes Ford could be incurring gross losses of about $9,000 per EV sold. The analyst expects Ford to reveal Thursday Model e operating losses of $6 billion for 2022. That’s after accounting for significant research and development investments — roughly 65% of the company’s total R&D — into the EV unit.

Why Ford's Mustang EV is dethroning its competitors

“The EV business could report much deeper losses than investors expect, which could make Ford’s target for 8% EV EBIT margin by 2026 particularly difficult to achieve,” Rosner said Monday in an investor note.

Aside from EV leader Tesla, no major automakers are expected to generate meaningful profits from electric vehicles for at least several years, as the industry works to increase EV output and manufacturing scale. That’s particularly true of EVs like Ford’s, as mass-market vehicles typically generate lower profits than luxury models.

Profit engine

Ford’s current bread and butter is vehicles with internal combustion engines, specifically its F-Series pickups, which have topped U.S. sales charts for more than 40 years.

The large pickups fuel the company’s operations and are expected to for “years to come,” Farley said when announcing the split last year.

Deutsche Bank estimates the Ford Blue traditional business could show an EBIT margin of 7.3% for 2022, more than offsetting last year’s EV losses.

Morgan Stanley’s Jonas said Ford’s new reporting structure should “confirm our view that the ICE business (Ford Blue) is highly cash flow generative and currently funding the capital consuming EV business.”

However, “Investors may question how long this can continue,” he said.

2023 Ford Super Duty F-350 Limited

Ford

Ford’s plan is to cut at least $3 billion in structural costs largely out of the traditional business by mid-decade to boost margins. Kumar Galhotra, head of Ford Blue, said the company expects to do this by reducing complexity, quality and structural costs over the next two to three years, he said in March 2022.

“Nothing is going to be off the table,” Galhotra said last March. “Our complexity needs to be radically simplified; our warranty costs need to be substantially lower. Our advertising cost needs to be what we do when we invest in our products. Those investments need to be made at world-class efficiency.”

Ford Pro surprise?

The pleasant surprise on Thursday may be the profitability of Ford Pro, the company’s fleet unit. Deutsche Bank estimates that Ford Pro would have been the company’s most profitable automotive unit in 2022, with an EBIT margin of 23.5%.

Ford has long been a significant player in the commercial fleet markets in North America and Europe with its deep expertise in pickups and its huge-selling line of Transit vans. More recently, it has looked to increase the profitability of its fleet operations with software and services that draw on its decades of experience serving fleet operators – and that take advantage of the connectivity and new technologies built into its latest vehicles.

Thanks in part to those new technology-enabled offerings, Ford Pro’s recent profit margins will almost certainly impress. But will they be sustainable? Deutsche Bank’s Rosner, who has a sell rating on Ford’s stock, wrote that he wonders if Ford Pro’s profitability “could come under pressure as the segment ramps up vehicles with expensive electric powertrains.”

Sales of EVs are expected to be a significant part of Ford Pro’s business in the coming years as the company introduces additional electric models tailored for its fleet customers. That will almost certainly hurt Ford Pro’s margins as Ford’s EV production ramps up. (In 2022, the numbers were still small: Only 6,500 of the roughly 105,000 Transit vans that Ford sold in the U.S. last year were EVs.)

Still, Ford Pro CEO Ted Cannis says fleet electrification offers new opportunities for Ford Pro.

“Our commercial customers are confused [about EVs], and they want a lot of help,” Cannis said at an Evercore utilities conference in January. “The key part for us to accelerate the move to electrification is to make it easier.”

Ford CEO Jim Farley responds to rough quarter and carmaker losing $2 billion in 2022
Continue Reading

Trending