Ford's Defining Electric Vehicle Is Crushing It, and It's a Big Deal

Investors widely understand two things about the automotive industry: Trucks drive massive profits for manufacturers, and the future is trending toward electric vehicles.

In the past, those two talking points have caused concern for some auto investors, because it wasn't a guarantee that electric trucks would be adopted as readily as cars.

Fortunately, if Ford Motor Company's (F -0.16%) F-150 Lightning is any indication, the future of electric trucks is bright. Let's dig into how Ford's F-150 Lightning is crushing it, and why it's a big deal.

Reason for optimism

One of the first things that might catch investors' eyes regarding the F-150 Lightning is its victory with MotorTrend judges.

The new F-150 Lightning electric pickup hauled the 2023 MotorTrend Truck of the Year award into its trophy collection, and it was the first electric truck to win by a unanimous vote from judges. It also marked only the second time an electric vehicle has unanimously won in a MotorTrend "Of The Year" vote.

"The F-150 Lightning's instantaneous torque and standout ride and handling make it without a doubt the best truck Ford has ever made..." said MotorTrend Group Head of Editorial Ed Loh. "The Ford F-150 Lightning is no less than a milestone achievement in the history of American mobility."

While the compliments and accolades are wonderful for the automaker, it's just as important, or more so, that sales also impress. So far, so good, as the F-150 Lightning was America's best-selling electric truck in November and December. Since its May launch, the electric truck helped push Ford to the No. 2 electric vehicle brand in the U.S. through December, and its sales are growing at twice the rate of the overall industry.

In fact, Ford sales of EVs were up 126% in 2022, compared to the prior year, and were up 223% in December alone.

Beyond the sales numbers

Rave reviews and accelerating sales figures are just part of the equation, however. When investors dig deeper, there's another story that drives alongside those narratives: Conquest rates.

Conquest rates are essentially what the industry considers a sale to buyers who are not currently customers. In the highly loyal and competitive automotive industry, high conquest rates are rare and also incredibly valuable.

Ford's F-150 Lightning's conquest rate should have investors excited about its future. Early in 2022, it was noted that reservations for the Lightning showed a 75% conquest rate. That's a shockingly high number, and will benefit the company as it brings in, and hopefully retains, new customers.

For comparison, General Motors' (GM -0.51%) Chevrolet Silverado EV has over 170,000 reservations for its electric truck, and just over half of them are new to GM -- which is still a solid figure in a historically brand loyal industry.

Lightning-fast start, but what's next?

There's little question that Ford's F-150 Lightning is off to a great start, but there could be speedbumps in the near term.

The first potential speedbump is Ford's electric truck production ramp-up. As it currently builds Lightnings around the clock, Ford is also working to boost production capacity to 150,000 F-150 Lightnings annually by mid-2023 -- which is almost quadruple the original plan.

Another potential speedbump is increased competition, because investors know that crosstown rival General Motors and Stellantis (STLA -1.56%) aren't far behind. In fact, GM's Chevrolet Silverado EV hits the roads in a few months, with its sister GMC Sierra EV pickup to follow in 2024. Stellantis hopes to launch the Ram 1500 EV in 2024.

The bottom line

While the automotive industry is on the cusp of evolving at a pace we haven't seen in decades, the future will eventually be similar to the status quo: Big trucks will likely drive big profits. Remember, not even a decade ago, Morgan Stanley analyst Adam Jonas estimated Ford's F-150 generated roughly 90% of the automaker's global profits.

That makes the next few years incredibly important, as these new electric trucks will define new customers' perceptions of the brands and products.

So far, Ford's F-150 Lightning has hit the road with great momentum, but investors will want to watch closely as the competition heats up in a critically important segment.