Despite the challenges in the auto industry, Ford Motor Company F is poised to shine in 2024 by focusing on profitable hybrids and quality improvement.
What Happened: With softening demand for electric vehicles (EVs), Ford’s CEO Jim Farley is steering the company toward more lucrative hybrids, reducing investments in less profitable EVs. The company’s hybrid sales showed a strong performance, growing 55.5% in Q4 2023, while EV sales rose only 27.5%, reported CNBC.
Jim Cramer, a prominent market commentator with a bullish outlook on Ford’s hybrid business, suggests that the management should allocate more resources to enhance the company’s “incredible hybrid business” to increase profits.
Despite the diminishing demand for electric vehicles, Ford’s hybrid sales for the fourth quarter and the year grew by 55.5% and 25.3%, respectively. The Maverick Hybrid and the F-150 Hybrid were the top performers, with sales increasing by 67% and 41%, respectively. To adjust to the market demand, Ford recently announced plans to halve the production of its all-electric Lightning.
Analysts at Morgan Stanley and Wells Fargo have a bleak outlook on the auto industry’s near future. However, they see an opportunity for legacy automakers like Ford and General Motors to unlock value through strategic capital allocation and product focus.
The second crucial factor for Ford’s success in 2024 is to address its quality control issues. The company’s high warranty costs have been impacting its profits. Ford’s third-quarter earnings were lower than expected due to a $1.2 billion increase in warranty expenses. These costs were attributed to recalls and higher repair costs due to inflation.
Why It Matters: Ford’s recent record-breaking U.S. sales and its focus on the hybrid business could be the recipe for success in 2024. The automaker’s decision to shift production to hybrids in response to market demand and its commitment to addressing quality issues could prove to be game-changer strategies.
Meanwhile, Cramer has repeatedly voiced support for Ford. Last year in June, the prominent market commentator said although investors should continue to own Tesla stock because of its tremendous growth potential, he also sees value in Ford.
Read Next: Tesla Earnings Around The Corner: As Stock Struggles, Analyst Highlights 3 Numbers That Matter
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