Core Insights - Ford Motor Company has decided to withdraw its $7,500 tax credit program for EV leases after the federal subsidy expiration on September 30, 2025, aligning with a similar decision by General Motors [1][2] - The company will not claim the EV tax credit but will maintain competitive lease rates in the market, contrasting with competitors like Hyundai and Stellantis that are offering direct cash incentives [2] - Ford's shares have increased by 15.3% year-to-date, outperforming both the industry and its rivals [4] Sales Performance - In the third quarter of 2025, Ford sold 545,522 vehicles in the U.S., marking an 8.2% year-over-year increase, with sales of pickups and vans rising by 7.4% [8][9] - Sales of electrified vehicles, including hybrids and all-electrics, reached 85,789 units, up 19.8% year-over-year, representing 15.7% of total sales [8][9] Ford Pro Segment - Ford Pro is experiencing strong order books and a 30% increase in software subscriptions, indicating a promising future for the segment [11] - The successful launch of the all-new Super Duty and increasing demand across vehicles, software, and services contribute to Ford Pro's growth [11] Financial Outlook - Ford has raised its expected tariff impact for 2025 to a net $2 billion, up from a previous estimate of $1.5 billion, with a gross tariff cost forecast now at $3 billion [12][13] - The Model e segment continues to face challenges, with losses widening to $5.07 billion in 2024 due to pricing pressure and high costs associated with new EV development [13] Valuation and Broker Ratings - Ford appears undervalued with a forward sales multiple of 0.28, significantly lower than the industry's five-year average [14] - The average brokerage recommendation for Ford stock is 3.12 on a scale of 1 to 5, indicating a neutral stance among analysts [15] Conclusion - Ford demonstrates solid operational performance and market resilience, with strong sales momentum and expanding demand in its Ford Pro division [19] - Despite challenges from tariffs and losses in the EV unit, Ford's attractive valuation and focus on software-driven revenue suggest a compelling long-term investment opportunity [20]

Investment Rating - The industry investment rating is "In-Line" [9]. Core Insights - China's rare earth export restrictions pose significant risks to the global auto industry, potentially impacting FY25 guidance and catalyzing faster tariff negotiations between the US and China, as well as the EU and China [1][12][21]. - The auto sector heavily relies on rare earth elements (REEs) and magnets, with approximately 38% of NdFeB magnets used in automotive applications, particularly in electric vehicles (EVs) [5][12]. - The current shortage of REEs is beginning to disrupt the automotive supply chain, with several OEMs already experiencing production halts due to insufficient magnet supplies [6][14]. Summary by Sections Rare Earth Export Controls - China has implemented export controls on seven heavier rare earth elements, which are crucial for the production of magnets [3][4]. - Chinese companies dominate the global supply chain, controlling 65% of mined and 88% of refined mid to heavy rare earths, and over 90% of NdFeB permanent magnet supply [4]. Impact on Automotive Sector - The automotive industry is facing a shortage of magnets, which are essential for various components in vehicles, especially EVs [5][6]. - The average usage of REEs in EVs is about 3 kg per vehicle, compared to only 100 grams in internal combustion engine (ICE) vehicles [5]. Supply Chain Disruptions - The restrictions have already led to production shutdowns at several OEM plants, including Ford and Suzuki, with further disruptions expected as inventories deplete [6][14]. - The approval process for REE exports from China has slowed, complicating the supply situation for global manufacturers [4][15]. Future Outlook - The report anticipates a potential hit to FY25 guidance in the upcoming 2Q25 results, with OEMs likely to provide a range of guidance based on different tariff and REE scenarios [18]. - The situation mirrors the semiconductor shortage experienced in 2021, with the potential for significant downward revisions in global light vehicle production forecasts if REE shortages persist [17].