What happened

As trading approached the halfway mark on Thursday, the three major indexes all sit firmly in the red. But one stock in particular is still glowing a reassuring shade of green this morning: Ford (F 0.67%), up 2.4%.

If you ask many investors, this might be due to Ford's performance at the Detroit Auto Show last night, and in particular car enthusiasts' excitement over Ford's unveiling of a seventh-generation  Mustang featuring a powerful 5-liter V-8 engine.

But there's another reason Ford stock is moving higher today, recovering from two straight days of stock market losses.  

So what

Specifically, at the same time as it was unveiling its new gasoline-powered muscle car yesterday, Ford unveiled a new plan of action for selling electric vehicles (EVs) through its dealer network. To wit, if Ford dealers want to be able to sell Ford EVs, they'll need to make up to $1.2 million in updates that include installing EV chargers at their dealerships.  

This might sound like something that would put Ford at odds with its dealers (and it still might). But consider too that the Biden Administration plans to hand out an initial $900 million in grants to build EV chargers across 35 states, and $7.5 billion in total grants through the Inflation Reduction Act.

Those grants will go to states -- not to Ford dealers -- but they'll still encourage the sale of EVs that will help dealers put their new chargers to use. And both Ford and its dealers could further benefit from the administration's plans to require nearly all U.S. government agencies to buy only EV and hybrid electrics by 2027.    

Now what

The news gets even better for Ford. As The Wall Street Journal reported yesterday, dealers might not like being required to spend $1.2 million on chargers and other improvements. But Ford is also working to reduce the amount of inventory that its dealers hold on their lots, which could reduce their inventory costs -- a dealer's single largest cost of operation.  

Ford wants to move toward a business model where more of its EVs are bought directly from the company, taking a page from Tesla's playbook. This could better match supply of its cars with demand for them, improving profitability for the company as a whole. With profit margins at Ford already starting to move back toward historical levels after a monster 2021 (in which net profit margins passed 13%), that's good news for investors.

Ford shares currently trade for just 8.3 times projected 2023 earnings, and its 4.1% dividend yield in and of itself justifies half the valuation. So I think investors are making the right call in bidding up Ford stock today.