Ford Motor Company’s CEO Jim Farley has a message for Wall Street: stop obsessing over Tesla’s Full Self-Driving (FSD) technology and pay attention to Ford’s lucrative Pro business unit. Farley made these remarks at a Wolfe Research conference on Thursday, where he highlighted the potential and profitability of Ford Pro, which caters to commercial and fleet customers with a range of services and products.
What is Ford Pro?
Ford Pro is a business unit within Ford that combines the company’s traditional fleet and commercial operations with emerging telematics, logistics, and connected services. Ford Pro aims to provide solutions for diverse business clients, from small-town tradespeople to multinational corporations.
Ford Pro boasts half a million subscribers and a robust 50% gross margin. The unit’s pretax earnings are expected to reach $8 billion to $9 billion this year, surpassing the estimated losses in the Model E EV business and the earnings projections for the traditional “Blue” business.
Ford anticipates revenue from telematics and non-traditional subscription services to reach $2,000 per vehicle year, or around $167 per month, by the upcoming years. Farley reiterated Ford Pro’s potential, highlighting its pivotal role in the company’s future.
Why Ford Pro matters
Farley compared Ford Pro to Deere & Co seven years ago, noting that the farm equipment maker’s stock has since increased by about 235%. He also emphasized that Ford Pro is undervalued within the automaker.
“If you’re looking for the future of the automotive industry, stop looking at FSD and Tesla. Look at Ford Pro. It’s got half a million subscribers with 50% gross margin,” Farley said.
Morgan Stanley’s Adam Jonas likened Ford Pro to the company’s “Ferrari,” citing the undervaluation of Ferrari before its spin-off from Fiat Chrysler in 2016. He highlighted Ford Pro’s potential as a lucrative business during Ford’s recent earnings call.
“Now Ford has a Ferrari, it’s called Ford Pro. And I think we agree, people are ignoring the cash cow,” he said.
How Ford Pro fits into Ford’s strategy
Farley’s comments come amid a series of significant developments at Ford. Earlier this month, he announced that the company’s next generation of EV products is expected to be profitable within the first 12 months of their launch. This is part of Ford’s broader restructuring and growth plan, in which the Pro unit plays a crucial role.
However, Ford’s journey to this point has not been without its challenges. The company has faced strikes and higher wages for its workers, which could impact margins and future investments. Additionally, Ford is delaying or cutting spending by billions of dollars on EVs amid slower-than-expected adoption of its current models and significant losses on its electric vehicles.
Farley’s comments come in the wake of Ford’s impressive 2023 sales figures, which were acknowledged by Tesla CEO Elon Musk despite their fierce rivalry in the U.S. electric vehicle market.
