Ford (NYSE:F) held their Capital Markets Day on Monday in Dearborn, Michigan where the company focused on the steps they are taking to meet longer-term profit targets, including actions related to cost, software and services, and product mix.
Ford reiterated its long-term goal of achieving a 10% EBIT margin by 2026, with the Model e segment aiming for 8%. The Ford Blue division is anticipated to achieve a double-digit EBIT margin, while Ford Pro is expected to reach a mid-teen EBIT margin. Ford's production forecast for the Model e assumes the manufacturing of 2 million battery electric vehicles (BEVs) by the end of 2026.
The automaker believes that enhancing its margin profile can be achieved by placing a greater emphasis on cost management. The company acknowledges having approximately $7 billion higher costs compared to its competitors, predominantly within its specific segment. Ford identifies several potential avenues for cost reduction, including streamlining complexity, enhancing supply chain stability, optimizing manufacturing processes, and implementing engineering redesigns.
However, Wells Fargo analysts rate Ford as Underweight, writing in a note that they believe “the rise in battery raw material costs has negatively impacted the outlook for BEV profitability, and consequently, F's profitability. Moreover, US fuel economy regulations will likely force automakers to sell BEVs to meet targets. Overall, we also see limited near-term catalysts, as normalization of new vehicle pricing and higher input costs likely offset expected volume increases. In addition, we also see headwinds from the 2023 UAW contract negotiations.”
Citi and Goldman Sachs analysts are Neutral on the stock, with Goldman analysts writing in a note, “We continue to be positive on the steps that the company is taking to improve long-term profitability by not only improving vehicle hardware margins but also growing its capabilities and business in software and services.”
Ford also announced new Lithium agreements to help reach their 2M EV goal by 2026. Nemaska has committed to supplying Ford with up to 13K tons per year of lithium hydroxide for a duration of 11 years. EnergySource Minerals, starting from 2025, will provide lithium hydroxide from a facility with a capacity of 20K tons per year. Albemarle (NYSE:ALB) announced it would supply >100K tons of Li for 3M EV batteries from 2026-30. Compass Minerals (NYSE:CMP) will deliver up to 40% of its Li carbonate to Ford for 5 years once production begins. These strategic partnerships in the lithium sector will support Ford in securing the necessary resources for their electrification goals.
Shares of F are down 0.26% in pre-market trading on Tuesday.