Can Ford (NYSE: F) Save The US EV Industry?

Ford Motor Company (F) yesterday reported stellar U.S. vehicle sales for May, with the company selling 190,014 vehicles during the month, a YoY increase of 11.2%. EV sales totaled 8,966, a notable growth of almost 65%. Since the beginning of the year, Ford has sold 37,208 fully electric vehicles compared to just 19,809 in the corresponding period the previous year. This exponential growth in EV sales is a testament to the growing popularity of Ford’s F-150 Lightning truck, which has registered unit sales of 13,093 in the first five months of 2024. Other EV models, such as Mustang Mach-E and E-Transit, also registered healthy sales growth of over 40% in May, highlighting the strong performance of Ford’s EV business across the board.

Why The US Is Still Lagging In The Market

In 2023, EVs accounted for almost 15% of new vehicle sales in Europe, while it was just 7.6% in the U.S. This slow EV adoption in the U.S. has two major reasons.

First, the U.S. lacks affordable EV options, making it difficult for an average consumer to shift to a fully electric vehicle. A survey conducted by S&P Global in 2023 involving 7,500 respondents revealed that the number one concern among potential EV buyers is the lack of affordable EV options in the market today. This affordability concern topped other concerns, such as range anxiety and the need for a more robust charging network infrastructure. The Chevvy Bolt, which has a starting price of around $28,000 after Federal tax credits, is one of the most affordable EVs in the U.S. market today, but consumers do not have a lot of options below $50,000. Tesla, Inc. (TSLA), the biggest EV manufacturer in the U.S., is focused on premium EVs despite promising to introduce an affordable model.

Second, Americans prefer SUVs and trucks compared to Europeans, who prefer driving sedans and other types of small cars, and EV trucks are scarce. According to Forbes, 9 of the 10 best-selling vehicles in America in the last decade were trucks, but auto manufacturers have been slow to develop EV trucks. Ford and General Motors Company (GM) are leading the charge in trying to address the demand for EV trucks but it might take another couple of years until they can offer a full range of EV truck options to Americans.

Is Ford a Sustainable Venture Going Forward?

The electrification of Ford’s popular vehicle models, including the F-150 series, should help the company gain market share in the U.S. EV sector. Despite certain delays, Ford plans to invest upwards of $20 billion in the next few years to electrify its vehicle fleet. The company is also investing in battery technology while expanding its manufacturing capacity, which is a promising sign. Compared to Tesla, the EV market leader in the U.S., Ford is very attractively valued as the company’s EV efforts are yet to be fully rewarded in the market. Ford is currently valued at a forward P/E of just 6 in comparison to Tesla’s forward P/E of 68. With Ford poised to win market share in the electric trucks segment, the valuation disparity between the two companies will likely narrow, which makes Ford an attractive bet on the future of the EV sector.

Both Dilantha DeSilva and Stocks.News have positions in the stocks mentioned in this article. Please see our disclosure page for more information.