Ford Motor(US:F)2022-06-01 18:34Summary of Ford Motor Company Conference Call Company Overview - Company: Ford Motor Company (NYSE:F) - Event: Bernstein 38th Annual Strategic Decisions Conference - Date: June 1, 2022 - Participants: James Farley (President and CEO), Toni Sacconaghi (Bernstein Analyst) Key Points Industry Dynamics - The global auto market historically sees around 90 million units sold annually, but this may change due to the rise of electric vehicles (EVs) and autonomous driving, potentially leading to a contraction in unit sales over time [3][4] - The total addressable market (TAM) is expected to shift significantly, with a greater emphasis on software services and shared mobility rather than traditional vehicle sales [4][5] - The competitive landscape is becoming increasingly fragmented with new entrants in the EV space, particularly from China, which may lead to consolidation among traditional internal combustion engine (ICE) manufacturers and new EV players [6][7][8] EV Market Insights - Ford aims for 50% of its sales to be EVs by 2030, with a planned investment of $50 billion in EVs by 2026 [1] - The cost premium for EV powertrains compared to ICE powertrains is currently estimated at $25,000 to $27,000, driven by battery costs and other components [30][34] - The company believes that the second-generation EV products will significantly reduce costs through improved manufacturing processes and battery technology [32][33] Profit Pools and Revenue Composition - The shift towards software and services is seen as a major opportunity for revenue growth, with potential for significant profit pools in areas like advanced driver-assistance systems (ADAS) and fleet management [15][16][20] - The largest fleet operators in the U.S. are currently rideshare drivers, representing a significant market opportunity for tailored EV solutions [16] - Ford's strategy includes focusing on integrated systems and telematics for commercial vehicles, which are expected to drive profitability [20][21] Competitive Strategy - Ford is focusing on its strengths in commercial vehicles and passion brands, while restructuring its ICE business to fund future EV initiatives [58][59] - The company plans to simplify its vehicle designs and reduce costs through radical changes in manufacturing and distribution models [31][32][49] - Ford's approach to marketing is shifting towards enhancing customer experience rather than traditional advertising, aiming for a more integrated service model [45][54] Future Outlook - The company anticipates a challenging transition period as it balances the growth of its EV segment with the decline of its ICE business, but is committed to achieving positive contribution margins for its first-generation EVs by 2026 [65][66] - Ford aims for an EBIT margin target of 10% by 2026, with a focus on execution and talent acquisition to navigate the competitive landscape [67][68] Additional Insights - The competitive nature of the industry may pressure pricing for new technologies, but Ford believes that unique software offerings and customer experiences will help maintain profitability [17][18][21] - The digital ecosystem in China is evolving differently, with state-run companies having different motivations compared to Western firms, which may impact competitive dynamics [39][40] This summary encapsulates the key insights and strategic directions discussed during the conference call, highlighting Ford's commitment to transitioning towards a more sustainable and profitable future in the automotive industry.