In early December, automotive giant Ford Motor Company (F -4.69%) stopped taking reservations for its upcoming F-150 Lightning pickup truck after reaching 200,000, CEO James Farley revealed in a Dec. 7 talk with CNBC host Jim Cramer. Farley also discussed the Blue Oval's plans for its Rivian Automotive (RIVN -0.94%) stake and detailed further electrification plans. While there are some cautionary notes in the developments, the company's moves look like they oculd be potentially bullish overall.
Latest developments for the Ford F-150 Lightning
Slamming on the brakes on its F-150 Lightning pickup reservation program at 200,000, Ford says it won't accept any more reservations before the electric truck's likely summer 2022 arrival in showrooms. Describing why the company deemed the halt necessary, CEO James Farley said "we are completely oversubscribed with our battery electric vehicles, Lightning especially," on the CNBC Investing Club show.
The electric version of Ford's workhorse F-series pickup generated strong interest from the beginning, with 20,000 reservations made in the first day and 160,000 by early November. The last 40,000 reservations were made in less than a month. Farley noted the truck's popularity outstripped current manufacturing capacity of 70,000 to 80,000 vehicles, but anticipates the company to drastically increase capacity.
Ford halting reservations on the highly popular truck could potentially be viewed as a warning signal about the speed and extent of its electrification plans. This is particularly true since the CEO didn't provide an exact timeframe on when the company will be able to fully meet demand, instead offering a vague answer about Ford's focus on increasing capacity as one of the features of its business.
This lack of specifics is worrisome, especially since significant delays might lead to numerous canceled reservations or allow rivals, such as Rivian, to step in with their own electric pickup designs if production takes more than a year to catch up.
Counterbalancing this concern, however, is the fact Ford is committing $30 billion to electrification. This includes construction of multiple battery factories and a massive factory complex dubbed Blue Oval City in Tennessee, slated to come online in 2025. Even if Ford's up-front EV productive capacity falls short, extensive plans are in motion that should help bring manufacturing "up to speed" with demand in the next few years.
Ford's Rivian position and the race to expand manufacturing
One significant asset at Ford's disposal is its 12% stake in EV company Rivian. Originally planned as a partner in manufacturing Ford's electric vehicles, the Blue Oval's plans rapidly advanced past the point where it needed the help of an EV start-up to get its electrified lineup into production. Ford bought 102 million shares of Rivian in a series of purchases, spending $820 million in the process. Rivian's share value soared since then, pushing the worth of Ford's stake to approximately $12.5 billion as of the second week in December.
I argued previously the Rivian stake is strongly positive for Ford, since the Blue Oval can sell some of its shares for a few billion dollars any time it needs cash for investment without taking on additional debt. Now, the company has confirmed it plans to do exactly that, and that while returning cash to investors is a priority, it might also sell off part of its position to get money for acquisitions.
Can Ford live up to its EV hype after all?
During the Cramer interview, James Farley also mentioned the Blue Oval's intention to overtake Tesla (TSLA 1.38%). Though Ford recently achieved 10% EV market share in the U.S., this is an ambitious goal, particularly in light of the fact Ford says it will have trouble making 200,000 F-150 Lightnings, let alone overtake Tesla's current annualized production of over a million EVs annually.
Ford's inability to meet its 200,000 reservations with the initial Lightning production run suggests there could still be some speed bumps, and perhaps even stalls, on the road to transforming this legacy automaker into a 21st century EV giant. Some of the reservations may end up canceled as impatient customers opt for gasoline vehicles or choose competitors' EVs instead.
However, there is also arguably a bull case to be built on the reservation halt. It shows demand is significant for an F-150 electric pickup, and with the reservation deposit set at just $100, many customers may be more willing to accept delays than if they had committed larger sums. Ford's $30 billion investment in EV and EV battery manufacturing shows it is working aggressively to bring extensive factory capacity online as soon as possible, which will surely allow it fill the 200,000 reservations and then expand production to much higher levels in the coming years.
While the road to being a top EV maker may not be as smooth and swift as Ford's executives portray it, I still think the company is worth investing in as one of the top electric car stocks. In my opinion, the news coming out of the Blue Oval is bullish overall and does indeed show it's a possibly viable future challenger to Elon Musk's Tesla, even if that challenge is not quite as much of sure thing as the company itself claims.