We recently compiled a list of the 11 Best EV Stocks To Buy For The Long Term. In this article, we are going to take a look at where Ford Motor Company (NYSE:F) stands against the other EV stocks to buy for the long term.
The Challenges of EV Adoption and the Promise of Solid-State Batteries
On August 30, Mark Fields, former Ford CEO and President joined CNBC’s ‘Squawk Box’ to discuss the challenges facing electric vehicle (EV) adoption. Fields pointed out that early enthusiasm for EVs was driven by automakers and government regulations, but mass adoption is proving more difficult. Consumers are hesitant due to several factors including the high cost of EVs, the lack of visible and convenient charging infrastructure, and the slow charging times compared to gas refueling.
Fields suggested that automakers need to offer more affordable EVs and expand hybrid offerings while working towards breakthroughs in battery technology, especially solid-state batteries. These batteries could eventually reduce charging times to match the convenience of filling up at a gas station.
Fields commended his former company’s strategy as it involves focusing on hybrid models to ease consumers into EV technology without the range anxiety that comes with current models. He noted that automakers are also facing financial challenges in the EV space, as shown by his former company’s recent writedowns.
He emphasized that while automakers are working on delivering low-cost EVs, the real game-changer will be the development of solid-state batteries, which could significantly improve charging times and consumer convenience.
Exploring Three Scenarios for the Future of EVs
Despite the challenges, the EV industry seems inevitable and is poised to grow over the next few decades. We discussed the International Energy Agency’s (IEA) EV outlook in our article about the best EV stocks according to short sellers. Here is an excerpt from it:
“The IEA’s Global EV Outlook 2024 examined the potential paths to electrifying road transport by 2035. The report presents three scenarios: the Stated Policies Scenario (STEPS), the Announced Pledges Scenario (APS), and the Net Zero Emissions by 2050 Scenario (NZE). The STEPS considers current policies and market trends, the APS assumes that all government pledges will be fully implemented on time, and the NZE outlines a pathway to achieve net zero CO2 emissions by 2050.
The projections show that the global EV fleet could grow significantly by 2035. Under the STEPS, the number of EVs is expected to increase from less than 45 million in 2023 to 525 million by 2035. In the APS, this number could reach 585 million, while the NZE Scenario projects a more ambitious growth to 790 million EVs by 2035.
The report also discussed the growth of electric light-duty vehicles (LDVs), buses, and two/three-wheelers (2/3Ws). LDVs, which include passenger cars and light commercial vehicles, are expected to remain the largest segment of the EV market. Electric buses and 2/3Ws are also projected to see significant growth, especially in regions like China and India, where policy support is strong. However, achieving full electrification of these segments will require continued policy support and technological advancements.”
Moreover, governments worldwide are pushing for increased EV production due to environmental concerns, with the U.S. making significant moves in this direction. On July 11, the Department of Energy (DOE) announced $1.7 billion in grants to support the conversion of 11 auto manufacturing plants in eight states to produce electric vehicles and their components. This is part of President Biden’s “Investing in America” initiative, which is aimed at protecting union jobs and giving a boost to EV manufacturing.
The program is funded by the Inflation Reduction Act and will preserve over 15,000 union jobs and create nearly 3,000 new ones, which will support the production of EV components like batteries and electric motorcycle parts.
Our Methodology
For this article, we used screeners and ETFs to identify 22 EV manufacturers with a market cap of above $50 million and narrowed our list to 11 stocks with the highest average analyst price target upside, as of September 11. We took analyst comments mostly from The Fly and TipRanks. We also added the hedge fund sentiment around each stock which was taken from Insider Monkey’s database of over 900 elite hedge funds.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A Ford truck roaring down a highway, with powerful headlights blazing its way.
Ford Motor Company (NYSE:F)
Average Analyst Price Target Upside as of September 11: 47
Number of Hedge Fund Holders: 24.40%
Ford Motor Company (NYSE:F) is one of the world’s oldest and most recognized automobile manufacturers. The company is known for revolutionizing automotive production with the introduction of assembly line techniques. It is one of the largest automotive companies in the world with a diverse portfolio that includes vehicles under the Ford and Lincoln brands. It is the 8th best EV stock to buy for the long term.
According to the company, it is heavily investing in its electrification strategy, committing $22 billion through 2025 to advance EVs. The initiative includes electrifying key models like the Mustang, F-150, and Transit, with the aim of improving performance, capability, and productivity. The Mustang Mach-E and F-150 Lightning are already available.
The company is also expanding its manufacturing footprint, including a significant investment in the Rouge Electric Vehicle Center. The company’s electrification efforts align with its goal of achieving global carbon neutrality by 2050. The company is collaborating with other automakers and investing in battery technology, including a global battery center and increased funding in solid-state batteries to improve range, cost, and safety.
It is important to note that due to competition and a slowdown in global EV sales, Ford (NYSE:F) has recently scaled back its EV operations and is focusing more on hybrid technology. It can significantly benefit the company as it sells cars that allow consumers to adjust to the new technology before adopting it completely.
The company aims to offer hybrid powertrains across its entire Ford Blue lineup in North America by the end of the decade. It has experienced significant growth in EV sales, with an 86% increase in the first quarter of 2024, alongside a 42% rise in hybrid sales.
The launch of Ford’s new three-row electric vehicles at its Oakville, Ontario plant has been delayed to 2027 to take advantage of evolving battery technologies and better align with market demand.
As we mentioned in our best EV stocks under $50 article, Ford (NYSE:F) is prioritizing smaller, more affordable EVs over larger all-electric trucks and SUVs. Here is an excerpt from the article:
“The company’s CEO, Jim Farley announced plans to introduce a $30,000 all-electric vehicle in about two and a half years, emphasizing that profitability is a key focus. During the Aspen Ideas Festival held around the last week of June, Farley revealed that this vehicle, developed by a specialized Ford team, is intended to compete with Chinese automakers like BYD and an upcoming entry-level Tesla (NASDAQ:TSLA) model.
Ford (NYSE:F) is prioritizing smaller, more affordable EVs over larger all-electric trucks and SUVs, as Farley believes the latter is unlikely to be profitable due to the high costs of large battery packs. He highlighted the need for a shift in focus to smaller vehicles for both economic and environmental reasons, despite the historical profitability of larger vehicles like the company’s trucks.”
Ford’s (NYSE:F) average price target among 28 analysts is $13, which represents a 24.40% upside to the company’s stock at current levels on September 11. Additionally, in the second quarter, 47 hedge funds held positions worth $1.53 billion in the company. As of June 30, Fisher Asset Management is the company’s top shareholder with 67.3 million shares worth $844.542 million.
Overall F ranks 8th on our list of the best EV stocks to buy for the long term. While we acknowledge the potential of F as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than F but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.