Ford Motor Co. CEO Jim Farley gives a thumbs up during a news conference in Romulus, Miss., before announcing that Ford will partner with China’s Amperex Technology to build the Marshall, Miss. An all-electric vehicle battery factory on 13 March 2023.
Rebecca Cook | Reuters
Detroit – Ford Chief Executive Jim Farley on Thursday urged Wall Street to forget Tesla and its FSD driver assistance system as the future of the automotive industry, believes investors should pay attention to the Detroit automaker’s “Pro” fleet business.
Farley compared the unit’s pretax earnings to roughly double last year to $7.2 billion. Deere & Company That was seven years ago. Since then, the agricultural equipment maker’s inventory has increased by about 235%.
“If you are looking for the future of the automotive industry, stop looking at FSD. Tesla. Look at the Ford Pro. It has 500,000 subscribers and a gross margin of 50%,” Farley said at the Wolfe Research conference.
Ford Pro consists of the automaker’s traditional fleet and commercial businesses as well as emerging telematics, logistics and other connectivity businesses for commercial customers, ranging from local plumbers and electricians to large enterprises. It also includes parts and services for businesses.
Ford said earlier this month it expected the Pro unit’s pretax earnings to increase to $8 billion to $9 billion this year. In comparison, the company’s “blue” traditional business is expected to earn profits of about US$7 billion to US$7.5 billion, and the Model e EV business is expected to lose US$5 billion to US$5.5 billion.
Tesla does not disclose revenue or revenue from its advanced driver assistance software, which is sold under the names “Full Self-Driving Beta,” “FSD,” or “FSD Beta.” Many Wall Street analysts speculate that such software could bring in tens of billions of dollars in annual revenue by 2030.
Ford Motor, Tesla and Deere & Company stocks over the past seven years
Ford said it expects revenue from Ford Pro’s telematics and other non-traditional subscription services to increase to $2,000 per vehicle per year, or about $167 per month, over the next few years. Farley reiterated 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.
Morgan Stanley’s Adam Jonas last week called the Ford Pro the company’s “ferrari”, referring to the extremely profitable luxury sports car maker that was significantly undervalued before it was spun off from Fiat Chrysler in 2016.
“I remember when Fiat owned Ferrari, I valued it at about $4 billion. Now Ferrari is worth $80 billion, and when the business became part of Fiat, investors completely ignored it,” Jonas said at the Ford launch event. quarterly earnings call earlier this month. “Now Ford has a Ferrari and it’s called the Ford Pro. I think we agree that people are overlooking the cash cow.”
Jonas, a long-time Tesla bullish, believes the business is being neglected as profits are siphoned off to fund Ford’s “electric vehicle science program.”
Farley said Thursday that while consumer demand for electric vehicles has been lower than expected, fleet customers are actually adopting all-electric vehicles faster than the company expected.
The Pro business is an important part of Farley’s “Ford+” restructuring and growth plan. The department is led by Ted Cannis, who is considered a successful utility man within the company.
“We’ve always had a super successful pro-business … but not focused on it,” Farley said. “I think people are just starting to see (it).”
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