Key Points
Supply chain constraints and inflation continue to impact Ford’s business.
Ford expects to roll out the F-150 Lightning this spring and produce 100,000 Mach-Es in 2022.
The automaker is guiding for higher profit and free cash flow in 2022 compared to 2021.
Ford ( NYSE:F ) stock is now down around 30% from its all-time high set just three weeks ago. The company reported fourth-quarter and full-year 2021 earnings after market close on Thursday, capping off a terrific year in Ford’s core internal combustion engine (ICE) business and charting an encouraging path forward with its electric vehicle (EV) business. But Ford stock fell nearly 10% on Friday, mainly due to slowing growth in Q4.
Here are four things Ford investors should watch this year as the company ramps up EV production and rolls out the highly anticipated F-150 Lightning. Image source: Ford Motor Company. 1. Rising costs and supply chain challenges
In its Q4 2021 conference call, Ford said it expects commodity headwinds to add between $1.5 billion and $2 billion in 2022 costs. It also expects inflation to raise expenses even further as it impacts material, labor, and shipping costs across Ford’s business.
Ford now expects the chip shortage to persist throughout the entirety of 2022. The silver lining is that Ford is recognizing its mistakes and is now going to approach its procurement and inventories of key EV components much differently. The company has done an excellent job securing extra batteries needed for the Mach-E. And it looks like it’s going to take a similar approach with chips moving forward. Ford CEO Jim Farley said the following during the company’s Q4 2021 conference call: Perhaps the biggest gift for all the pain we’re going through now in semiconductors is that we have very painfully learned the lesson that we cannot manage the supply chain for these key components as we have. In fact, you could argue that in the change of transition to these digital electric vehicles that supply chain could be one of the biggest advantages a particular company has or doesn’t have. 2. EV production ramp up
Ford expects to produce 100,000 Mustang Mach-E electric SUVs in 2022. For reference, it sold just over 27,000 Mach-Es in 2021 but has repeatedly said its supply can’t keep up with growing demand. Arguably, it’s a good problem to have.
Anticipation for the Ford F-150 Lightning rollout is even stronger than for the Mach-E. Ford stopped taking reservations for the Lightning after pre-orders topped 200,000 in December . Ford has over 275,000 total reservations for the Mach-E, Lightning, and its E-Transit electric van.
Ford is on track to roll out the Lightning this spring and expects to grow total EV manufacturing capacity to 600,000 vehicles by 2023.
2022 is arguably the most important year for Ford. Anticipation for its EV production ramp up is a key driver behind Ford’s outperforming stock price. Even after the recent pullback, Ford stock is up 56% over the last year. If Ford can hit its 2022 goals by delivering more Mach-Es, growing the EV percentage of its sales mix, and making headway on Lightning deliveries, then the investment thesis for Ford to become a major EV player remains intact .
But it’s not just about producing and delivering a ton of vehicles. The favorable reception of the Lightning is an important factor that investors should monitor throughout 2022. Rolling out a strong first-generation electric truck would help establish Ford as a competent electric truck maker and likely help even more folks make the jump from ICE to EVs. If the Lightning ends up being underwhelming, it could stunt Ford’s growth. 3. North American profitability
Ford expects total vehicle volume growth between 10% and 15% in 2022, which will help drive profitability and offset inflation and supply chain costs. Despite Ford’s aggressive EV spending, it is guiding for $11.5 billion to $12.5 billion in 2022 earnings before interest and taxes (EBIT), which would be 15% to 25% higher than 2021. The standout is its North American EBIT margin guidance of 10% in 2022, which would be all the more impressive considering less profitable EVs are comprising a larger share of its product mix.
North America continues to be Ford’s most profitable region. The company lost money in Europe, China, and South America in 2021. However, Ford implemented a restructuring in these regions and expects all will be able to grow profitably going forward. If Ford hits its targets, it would show the company is capable of growing […]
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