Ford’s ‘Model T’ moment, capital reallocation from EVs takes pressure off shares

Ford (NYSE:F) is clawing back some recent losses as investors reassess its solid Q2 results and the strategic shift of diverting funds from its unprofitable EV unit to its cash cow Ford Pro division.

To accelerate the high-margin and reoccurring revenue of Ford Pro, CEO Jim Farley said on the earnings call, the company will “reallocate the resources on future EV programs to accelerate progress over [the company’s] multiyear business plan…and shift capital towards Pro.”

Farley also announced plans to build a “breakthrough” electric vehicle and platform in the U.S.

“This is a Model T moment for us at Ford,” Farley said of the new low-cost EV, presenting a chance to bring in “a new family of vehicles to the world that offer incredible technology, efficiency, space and features.”

These developments helped offset some of the pressure on shares from anticipated tariff headwinds, but analysts remain cautious that ongoing affordability issues and costs associated with reshoring manufacturing could make it difficult for the company to deliver consistent results through the rest of FY25, especially as warranty issues spill into H2 results.

Additionally, establishing a profitable EV business in the current environment (expiration of EV tax credits, margin pressures) will become even more problematic after Chinese EV tech migrates into the U.S.

“While we expect the company to put a ‘brave face’ on their EV strategy…investors remain skeptical for how Ford could operate a profitable EV business when even Tesla’s car business is unprofitable on an underlying basis,” Morgan Stanley’s Adam Jonas says.

Tariffs are also keeping a lid on Ford’s (NYSE:F) profitability, especially after the company said it expects a $2B headwind for 2025, leading to a downgrade in EBIT guidance for the year.

(Note: As we go to press, the U.S. and Mexico just announced a 90-day pause on tariffs, keeping the 25% import tax in place. The news is giving a modest lift to U.S. automakers).

However, in the event the two nations hammer out a deal before the end of October, Evercore ISI’s Chris McNally believes Ford (NYSE:F) can regain 15 to 30 cents of EPS “as Mexico is the majority of their tariff exposure through 400K of Mustang Mach E, Bronco, and Maverick production.”

Adds BofA Securities’ Federico Merendi, “We think Ford’s liquidity level is sufficient to weather potential challenges from production pressures, future product launches and tariffs.”

After setting a 6-month high at the open, Ford (F) shares have retreated, but are still holding onto a 2% gain from Wednesday’s close. Shares are up 9.6% year-to-date versus +2.4% and -31% for rivals General Motors (GM), and Stellantis (STLA), respectively.