Buy Ford Motor Company (F): Rising Truck Sales, BEV Growth Prospects and More

The market is paying attention to Ford Motor Company (NYSE:F) after the company revealed its strategic plan earlier this month. Investors cheered Ford’s decision to cut costs by $14 billion over the next five years. Ford’s CEO said in the announcement of the plan that Ford is well aware of the importance of adaption to change. Ford will introduce “connectivity” in all of its cars by 2019. Ford plans to take out $7 billion from its currently profitable trucks segment and invest it into smart and electric car production.

Ford Motor Company (NYSE:F) recently signed a deal with a Chinese electric car maker Zotye. The company is making an effort to revamp its existing facilities for the production of BEVs. Ford recently said that it had produced a new system for BEV production that will reduce costs by 50%.

Ford Motor Company (NYSE:F) is struggling because of the declining sales of its cars. But analysts are extremely bullish on truck sales of Ford, which keep rising. In September, F-Series truck sales increased by 21.4%. Overall truck sales surged by 19.9% in the month. Ford is still struggling to keep its margins above the required levels. But analysts think that rising sales and declining costs will help the company reach its operating margin goal of 8% in the coming months. People are now preferring to buy trucks and cross overs in the US. Analysts think that this trend will gain traction as oil is expected to remain cheap for the foreseeable future. This gives Ford an excellent opportunity to offset its declining car sales. In September, Ford’s F-150 was the best-selling vehicle in the US, followed by Chevrolet Silverado.

In China, consumers have also started to gravitate towards trucks and SUVs. McKinsey estimates that there will be over 150 million people driving SUVs by 2022. Given low competition in the country, Ford will be a huge benefactor of this changing trend.

But analysts are not happy about the fact that Ford is still focusing and has huge emphasis to internal combustion engine-based cars, despite accepting the changing dynamics of the car industry. In its strategic plan, Ford showed this graph to investors.

http://shareholder.ford.com/~/media/Files/F/Ford-IR-V2/events-and-presentations/2017/10-03-2017/Ford-CEO-Strategic-Update-presentation.pdf

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Ford accepts that by the end of 2030, Battery Electric Vehicles (BEV) will have strong penetration worldwide. Analysts think that Ford is sticking to conventional vehicles and hybrid cars because, just like most of the traditional car companies, it lacks the production capacity for all-electric cars.

Ford Motor Company (NYSE:F) has gained about 9% over the last six months. The stock has a dividend yield of over 4.5%, which is impressive when compared to industry peers.