Ford Motor Co. CEO Jim Farley gives the go-ahead before announcing that Ford Motor will partner with China-based Amperex Technology to build an all-electric vehicle battery plant in Marshall, Michigan, during a press conference in Romulus, Michigan, February. 13, 2023.
Rebeca cooking | Reuters
DETROIT – Ford engine CEO Jim Farley on Thursday urged Wall Street to forget about tesla and its FSD driver assistance systems as the future of the auto industry, competing investors should focus on the Detroit automaker's “Pro” fleet business.
Farley compared the unit, which roughly doubled pretax profits last year to $7.2 billion, with where Deere and company. It was seven years ago. Since then, shares of the agricultural machinery maker have risen approximately 235%.
“If you are looking for the future of the automotive industry, stop looking at FSD and tesla. Look at the Ford Pro. It has half a million subscribers with a 50% gross margin,” Farley said during a Wolfe Research conference.
Ford Pro is comprised of the automaker's traditional fleet and commercial businesses, as well as emerging telematics, logistics and other connecting operations for commercial customers, ranging from local plumbers and electricians to massive corporations. It also includes spare parts and services for companies.
Ford expects pretax profits from the Pro unit to rise to between $8 billion and $9 billion this year, the automaker said earlier this month. That compares with profit expectations for the company's traditional “Blue” business of about $7 billion to $7.5 billion and projected losses in its Model e electric vehicle business of $5 billion. from dollars to 5.5 billion dollars.
Tesla does not break out revenue or profits for its premium driver assistance software, marketed as Full Self Driving Beta, FSD or FSD Beta. Many Wall Street analysts have speculated that such software could generate tens of billions of dollars per year by 2030.
Ford Motor, Tesla and Deere & Co. Stock Over the Past Seven Years
Ford has said it expects revenue from telematics and other non-traditional subscription services to rise to $2,000 per vehicle per year, or about $167 per month, for Ford Pro in the coming 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 Ford Pro the “ferrari,” referring to the extremely profitable luxury sports car maker that was significantly undervalued before being spun off from Fiat Chrysler in 2016.
“I remember a time when Fiat owned Ferrari, and I had a valuation of around $4 billion. Now Ferrari is worth $80 billion today, and the business was totally ignored by investors when it was part of Fiat.” Jonas said during the Ford conference. quarterly results call earlier this month. “Now Ford has a Ferrari, it's called Ford Pro. And I think we agree: people are ignoring the source of income.”
Jonas, a longtime Tesla bull, argued that the deal is being overlooked because profits are being diverted to fund Ford's “electric vehicle science project.”
Some investors may be skeptical of Farley's comments. The Ford executive has previously talked about Ford being a growing competitor to Tesla with its vehicles and technologies, but that, overall, hasn't happened 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 current models as well as significant losses on its electric vehicles. The company is developing its next-generation electric vehicles that it promises will be profitable within a year of going on sale.
Farley said Thursday that while demand for electric vehicles is slower than expected for consumers, fleet customers are actually adopting all-electric vehicles faster than the company had anticipated.
Pro operations are an important part of Farley's “Ford+” growth and restructuring plan. The unit is headed by Ted Cannis, considered a successful utility man within the company.
“We always had great pro-business success… but we didn't focus on it,” Farley said. “I think people are just starting to see [it]”.
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