What happened
Shares of Ford Motor Company (F 2.38%) popped 8.4% on Wednesday after the auto giant revealed its new growth strategy.
So what
Ford will split its business in two. One will focus on expanding its production of electric vehicles (EVs), while the other will house its legacy automotive manufacturing operations.
CEO Jim Farley has set aggressive growth targets for its new EV division. He wants Ford to produce more than 2 million electric vehicles per year by 2026. That would account for roughly a third of the company's global vehicle production volume.
Farley is optimistic that Ford can achieve its ambitious targets. "We have made tremendous progress in a short period of time," Farley said. "We have launched a series of hit products globally and demand for our new EVs like F-150 Lightning and Mustang Mach-E is off the charts."
Image source: Getty Images.
Farley's plan, however, won't be cheap. Ford intends to double its EV-focused capital expenditures and expenses to $5 billion in 2022, and the company will likely have to maintain a high level of spending in the years that follow.
So, while the EV division focuses on growth, the legacy business will prioritize profits. Ford will seek to wring out $3 billion in costs from its internal combustion engine (ICE) manufacturing operations.
Now what
EVs are a potentially massive market -- one that some analysts believe could become a $5 trillion opportunity over the next decade. Due to the strong demand for electrified versions of Ford's popular Mustang sports car and F-150 pickup truck, investors are becoming more optimistic about the automaker's ability to compete and win within this rapidly expanding industry. Today's news only helps to increase their bullishness on Ford's prospects.
