Ford Motor Company (F -1.02%) is an iconic name in the auto sector with a long history of success. To the company's credit, its business is resilient even during economic downturns and managed to avoid filing for bankruptcy protection during the 2008-09 Great Recession, unlike a notable U.S. peer.
But is this automaker's stock likely to turn investors into millionaires?
There is always a chance of that happening, but investors considering this stock are likely better off approaching it with a more realistic outlook on the possible outcomes.
What does Ford do?
Ford is one of the largest automotive companies on the planet, with a market cap of around $40 billion. In 2024, the company sold more than 2 million vehicles, with especially rapid growth in the sales of electric (EV) and hybrid vehicles. That said, the company's lineup is heavily tilted toward trucks and SUVs, which make up around 56% and 42% of sales, respectively. Traditional cars (like sedans) now account for a small part of the overall business.
There's another important dichotomy that shows up when you take a closer look at the company's sales numbers. While EV sales soared 38% year over year in 2024, combustion engine sales stagnated, gaining just 0.2%. The overall growth of 4.2% came almost exclusively from the transition to EV vehicles.
That's not bad news, per se. However, EVs only made up around 14% of Ford's overall vehicle sales. There is a major change taking shape in the auto sector, and Ford is walking a very fine line as it tries to change with the times.
A Ford F-150 Lightning electric vehicle. Image source: Ford Motor Company.
Ford is profitable, but its EVs aren't the driving force
Ford has broken its business into three segments: Ford Blue, Ford Model E, and Ford Pro. Think of these divisions as combustion engines, electric vehicles, and business sales (both combustion and EV), respectively.
Through the first nine months of 2024, Ford Blue and Ford Pro generated earnings before interest and taxes (EBIT) of roughly $3.7 billion and $7.4 billion, respectively. Ford Model E's EBIT was negative $3.7 billion or so. It lost about as much as the combustion engine business made. And it only accounts for a small portion of the company's overall vehicle sales, as noted.
So Ford, as a business, is going through a difficult transition. It is walking a tightrope between the old technology that powers its business today and the new technology to which the world is transitioning. The upside here is that there is likely to be room for improvement as it continues to ramp up EV production (cost savings from economies of scale, for example). The downside is that there's a real risk that Ford will end up with huge, stranded assets that just aren't as valuable as they once were if combustion vehicle manufacturing equipment becomes obsolete.
In order to be a millionaire-maker stock, Ford has to successfully make the transition from combustion engine to EV, or at least find some balance that lets it thrive over the long term. And that has to be achieved in a market that includes fierce competitors like Tesla, a leader in EVs, and every other established automaker that is trying to do the same thing as Ford right now.
One more problem to consider with Ford
It is far from clear (but seemingly unlikely) that Ford stock is going to be able to mint millionaires anytime soon. Complicating this fact is that Ford hails from the consumer discretionary sector, which is highly cyclical in nature. Given the high cost of vehicles, sales generally fall during periods of economic weakness.
So not only does Ford have to navigate a difficult business transition, it also has to deal with the inherent volatility of the auto business as it does so. Ford is probably not a great option for conservative investors right now, and even more aggressive types might want to tread with caution, given all the moving parts in play today.
