Ford Motor Co. CEO Jim Farley waves before announcing that Ford Motor will partner with China’s Amperex Technology to build an electric vehicle battery plant in Marshall, Michigan, during a news conference in Romulus, Mich. Michigan in February. 13, 2023.
Rebecca Cook | Reuters
DETROIT – Ford Motor CEO Jim Farley on Thursday urged Wall Street to forget about it Tesla and 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 profit last year to $7.2 billion. Deere & Co. it was seven years ago. The farm equipment maker’s stock has risen about 235% since then.
“If you’re looking for the future of the automotive industry, stop looking at FSD and Tesla. Check out the Ford Pro. It has half a million subscribers with a 50% gross margin,” Farley said during a Wolfe Research conference.
Ford Pro consists of the automotive industry’s traditional fleet and commercial businesses, as well as emerging telematics, logistics and other connectivity functions for business customers – from local plumbers and electricians to huge corporations. Also includes parts and services for businesses.
Ford expects the Pro unit’s pretax profit to grow to between $8 billion and $9 billion this year, the automaker said earlier this month. That compares with earnings expectations for the company’s “Blue” traditional business of about $7 billion to $7.5 billion and projected losses in the Model e EV business of $5 billion to $5.5 billion.
Tesla does not derive revenue or profit from its premium driver assistance software, which is marketed as Full Self-Driving Beta, FSD or FSD Beta. Many Wall Street analysts speculate that such software could bring in tens of billions of dollars a year by 2030.
Shares of Ford Motor, Tesla and Deere & Co. the last seven years
Ford said it expects revenue from telematics and other non-traditional subscription services to grow 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 automotive industry. Some on Wall Street agree.
Morgan Stanley’s Adam Jonas last week called the company’s Ford Pro “Ferrari,” referring to the highly profitable luxury sports car maker that was significantly undervalued before it was spun off from Fiat Chrysler in 2016.
“I remember a time when Fiat owned Ferrari and I had a valuation of about $4 billion. Now Ferrari is worth $80 billion today and the business was completely ignored by investors when it was part of Fiat,” Jonas said during Ford’s earlier this month. “Now Ford has a Ferrari, it’s called the Ford Pro. And I think we agree, people are ignoring the cash cow.”
Jonas, a longtime Tesla bull, argued that the business is being overlooked because profits from it are being funneled to fund Ford’s “EV science project.”
Some investors may be skeptical of Farley’s comments. Ford executives have discussed in the past that Ford is a growing competitor to Tesla with its vehicles and technologies, but that, in general, has largely not happened yet.
Ford is delaying or reducing billions of dollars in spending on electric vehicles, including domestic battery production, amid slower-than-expected adoption of its current models and significant losses in its electric vehicles. The company is in the midst of developing next-generation electric cars that it promises will be profitable within a year of launch.
Farley said Thursday that while EV demand is slower than expected for consumers, fleet customers are actually adopting pure electric vehicles faster than the company had predicted.
Pro features are an important part of Farley’s “Ford+” restructuring and development plan. The unit is headed by Ted Kanis, who is considered a successful company man.
“We’ve always had a very successful pro-business … but we weren’t focused on that,” Farley said. “I think people are just starting to see [it].”
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