Ford Motor Company CEO Jim Farley gives a thumbs-up sign before announcing Ford Motor Company's partnership with China-based Amperex Technology to build an all-electric vehicle battery factory in Marshall, Michigan, during a press conference in Romulus, Michigan on February 13, 2023.
Rebecca Cook | Reuters
Detroit — “ ford motor CEO Jim Farley on Thursday urged Wall Street to forget about it Tesla And its FSD driver assistance systems are considered the future of the auto industry, competing investors should instead focus on the Detroit automaker's “Pro” fleet business.
Farley compared the unit, which nearly doubled its pre-tax profits last year to $7.2 billion, to… Deere & Co It was seven years ago. The farm equipment manufacturer's stock has increased about 235% since then.
“If you are looking for the future of the automotive industry, stop looking at FSD and… Tesla. Look at Ford Pro. “I got half a million subscribers with a 50% gross margin,” Farley said during the Wolf Research Conference.
Ford Pro consists of the automaker's traditional fleet and commercial businesses, as well as emerging telematics, logistics and other communications operations for corporate customers – from local plumbers and electricians to large corporations. It also includes spare parts and services for companies.
Ford expects the Pro unit's pretax profits to rise to between $8 billion and $9 billion this year, the automaker said earlier this month. This compares to earnings forecasts for the company's traditional “blue” business of about $7 billion to $7.5 billion and expected losses in the Model e EV business of between $5 billion and $5.5 billion.
Tesla does not generate revenue or profits from its premium driver-assistance software, which is marketed as Full Self-Driving Beta, or FSD or FSD Beta. Many Wall Street analysts have predicted that such programs could generate tens of billions of dollars annually by 2030.
Ford Motor, Tesla, and Deere & Co. stocks. Over the past seven years
Ford said it expects revenue from telematics and other non-traditional subscription services to increase to $2,000 per vehicle per year, or about $167 per month, for the Ford Pro in the coming years. Farley confirmed on Thursday that 20% of Pro's total revenue is expected to come from such services by 2026.
Farley reiterated that the Ford Pro is undervalued within the automaker. Some on Wall Street agree with this view.
Morgan Stanley's Adam Jonas last week described Ford Pro as a “company.”Ferrari“, referring to the highly profitable luxury sports car manufacturer that was significantly undervalued before it was spun off from Fiat Chrysler in 2016.
“I remember the time when Fiat owned Ferrari, and my valuation of it was about $4 billion,” Jonas said during the Ford conference. “Ferrari is now worth $80 billion today, and investors completely ignored the business when it was part of Fiat.” Quarterly earnings call earlier this month. “Now Ford has a Ferrari, called the Ford Pro. And I think we agree with that, people are ignoring the cash cow.”
Jonas, a long-time Tesla supporter, asserted that this work is overlooked because profits from it are diverted to fund Ford's “electric vehicle science project.”
Some investors may be skeptical of Farley's comments. The Ford CEO has previously discussed Ford being a growing competitor to Tesla with its vehicles and technology, but that has generally not happened to a large extent yet.
Ford is delaying or cutting billions of dollars in spending on electric vehicles, including domestic battery production, amid slower-than-expected adoption of its existing models as well as significant losses in its electric vehicles. The company is in the middle of developing the next generation of electric cars that it promises will be profitable within a year of going on sale.
Although demand for electric vehicles is slower than expected for consumers, fleet customers are actually adopting all-electric vehicles faster than the company expected, Farley said Thursday.
Professional operations are a key part of Farley's “Ford+” restructuring and growth plan. The unit is headed by Ted Kanis, who is considered a successful service man within the company.
“We've always had a very successful pro-business program…but there hasn't been a focus on it,” Farley said. “I think people are just starting to see [it]”.
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