Lower prices due to slowing demand allowed Ford to more than double sales of electric vehicles in April, even as the automaker diverted resources from the loss-making unit. Despite the reasons behind these prices, Michael Ward, an automotive analyst at Freedom Capital Markets, said the nearly 130% jump in Ford’s battery electric vehicle (BEV) sales last month should be seen as a positive. “Ford has problems with pickup trucks – both BEVs and ICEs (internal combustion engine) – and so they haven’t been able to deliver them and some of that has probably been postponed until next month. April,” Ward said. Ford slowed production of its Mustang and Lightning models earlier this year as consumers hesitated to commit to electric vehicles due to their higher maintenance costs and lack of charging infrastructure. Sales of electric vehicles, which make up the struggling Ford Model e unit, rose 86% in the first quarter as production challenges and supply issues began to ease. Despite the increase in volumes, the Ford Model e saw its losses widen in the first quarter to reach $1.32 billion on only $100 million in quarterly sales. Both were worse than expected. “We learned a lot about our most expensive vehicles, Mach-E, when we dropped the price 17%, our volume increased 141%,” Ford CEO Jim Farley said on the conference call. post-results from last month. “That tells us that the more we can make a great product at an affordable price, the more attractive it is.” Ford has been a tough stock to own – showing signs of life in late 2023 and rising earlier this year. Things stagnated during a difficult month of April for the entire market. Ford has lost 1.5% year to date – well underperforming the consumer discretionary sector and the overall S&P 500 so far in 2024. F 1Y mountain Ford 1 year Last year, Ford said it would delay or cancel $12 billion in planned spending on new electric vehicles and shift more of its efforts toward higher-margin hybrid vehicles. Jim Cramer is a fan of the hybrid shift. Ford’s hybrid sales in April increased nearly 60% to 17,997 units. Although small compared to the 153,572 units of ICE vehicles sold last month, this is double the total of 8,019 electric vehicles. Sales of hybrids, which with ICE make up the Ford Blue division, jumped 42% in the first quarter. Ford Blue’s quarterly EBIT (earnings before interest and taxes) fell to $905 million on revenue of $21.8 billion. Both were below expectations. “Hybrids are a good solution for a lot of people,” Ward said. The F-150 hybrid pickup, for example, offers “flexibility where you don’t have to worry about infrastructure and charging,” he added. Besides the mainstream market, Ford is betting on electric vehicles and hybrids for their compelling use cases in commercial vans, trucks and vans, Ward said. This is where the company’s Ford Pro commercial division shines. Ford has a “competitive advantage” in the commercial sector, Ward said, because the automaker already has the infrastructure in place. While Ford Blue still accounts for the majority of revenue, Ford Pro made up ground by generating better-than-expected revenue of $18 billion and EBIT of $3 billion in the first quarter. Ford Pro also includes the company’s software and physical services that provide ongoing, recurring revenue streams with high margins. In summary, Ford’s April monthly sales numbers are further evidence of a strong start to 2024, giving investors like us confidence that management can reach the upper end of its forecast range. Full-year adjusted EBIT of between $10 billion and $12 billion. Ford’s 2024 outlook was released last month along with first-quarter results. The automaker also raised its adjusted free cash flow guidance for the year by $500 million to between $6.5 billion and $7.5 billion, and lowered the high end range by $500 million. its capital spending forecast, at $9 billion. The company hopes to get closer to the low end of the scale, at $8 billion. We are pleased to see the company’s ability to adapt to changing consumer preferences by adjusting pricing and production to stimulate and meet demand. We want management to take advantage of its low price-to-earnings ratio, which is the lowest in the S&P 500, and launch a buyback. We believe a buyback would be a catalyst for Ford shares, just as it was for General Motors, which announced its buyback plan in November. (Jim Cramer’s Charitable Trust is long F. See here for a complete list of stocks.) As a subscriber to CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. 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The Ford Mustang Mach-E and F-150 Lightning on display at the New York International Auto Show on March 28, 2024.
Danielle DeVries | CNBC
Lower prices due to slowing demand helped electric vehicle sales in April to Ford more than double, even as the automaker diverted resources from the loss-making unit.
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