This Could Be Big for Ford Stock
Investors characterize Ford Motor Company (NYSE:F) as a boring automaker, but the company’s next product may force them to change that view.
Ford stock has not performed very well this week, suffering the weight of an overall market slump that was triggered by concerns over the Chinese economy. However, the company has measures in place to ensure strength in the coming years.
Ford investors may be disappointed by the fact that the Detroit giant does not have any plans to work with Google, given the cold shoulder treatment the two Wall Street giants afforded each other at the Consumer Electronics Show (CES) show in Las Vegas. Nevertheless, Ford stock has a stronger future.
While Ford shareholders expecting a bombastic announcement of a partnership with Google may be disappointed, Ford’s president and CEO, Mark Fields, only avoided the topic of Google altogether. He neither confirmed nor denied the rumors of a Google-inspired “Model T,” which would certainly have been one of the most potentially disruptive agreements in the automotive sector.
Ford Stock Will Benefit from Significant Transformation Plan
This in no way undermines the blue oval company’s transformation toward new horizons, which include mobility (e.g., peer-to-peer technology and ride sharing) as well as autonomous driving.
In the CEO’s own words, “We [Ford] are very much accelerating our transition from being an auto company to being an auto and a mobility company.” (Source: “Ford’s future is filled with self-driving cars and drones,” Wired, January 6, 2016.)
Ford also noted that the company had just tripled its fleet of “Hybrid Fusion” self-driving models currently being tested in Michigan, on the streets of Silicon Valley (near the Technology Center in Palo Alto), and in Arizona. (Source: “Ford launches self-driving car tests in California in 2016,” Autoblog, December 16, 2015.)
Ford’s market reach makes it an ideal candidate to offer “robot cars for all.” Ford’s CEO said the company’s efforts are currently geared to producing an autonomous vehicle at an affordable price, addressing a wide audience and not just people who can afford luxury cars (a potential dig at Tesla Motors?). (Source: “Ford’s self-driving cars likely around 2020, says CEO Fields,” USA Today, January 5, 2016.)
However, citing its current driverless car partner, Velodyne, the manufacturer of the “Lidar” ultra-compact laser, Fields hinted that an improved “Sync 3” driverless feature, included in many current Ford models managing the infotainment system, would be available on many more of its vehicles with expanded functions. (Source: Ibid.)
Ford expects 2016 to be a “revolutionary year” for car manufacturers and for the transport system in general. (Source: “Ford Is Building an Autonomous, Self-Driving Car for the Masses,” International Business Times, January 5, 2016.) Meanwhile, rather than fade out of the limelight, Ford proves that Detroit wants to remain in the game and win it, taking back some of the shine it has lost to Silicon Valley in recent years.
Google’s driverless fleet may be the ideal complement to the “Smart Mobility Plan,” which Ford and Fields introduced at CES 2015. The Smart Mobility Plan addresses millennials’ preference for “flexible use” vehicles, transport on demand, and multi-modal transport solutions, including electric bikes. Ford stock is strong because its management has shown it is willing and ready to change the company’s approach.
As for zero emissions, Ford has confirmed the development of 13 electric and plug-in hybrid models by 2020, including the new “Ford Electric” (in production by the end of 2016), which will extend the range of battery-powered cars. Ford plans to invest more than $4.0 billion into these initiatives.
The Bottom Line on Ford Stock
Meanwhile, if Fields did not speak of Google during his presentation at CES, there was an announcement of a new partnership with Amazon.com, Inc. Ford will be able to interact with “Alexa,” a virtual assistant developed specifically for home automation. The concept, not far from Apple’s “Siri,” provides a bidirectional connection between “Sync” and Amazon’s system. This allows users to start their car, check its fuel level and battery condition, and open the garage door from their houses.
In turn, the same Ford owner (and perhaps owner of Ford stock?) will be able to turn on their residence’s heating, lights, or air conditioning from the car. In other words, Ford and Amazon have erased the barrier between home and vehicle.
Investors are valuing Ford as an automaker, but maybe it’s time to value Ford stock as a technology stock.