Last week, automobile powerhouses Ford Motor Company (NYSE:F), General Motors Company (NYSE:GM), BMW and Renault took an unusual step in their natural evolution, forming a coalition to explore the use of blockchain as a means of adding value to their product. It could have some interesting implications for Ford stock.
Blockchain is the same basic computer code that’s best known for being the foundation of cryptocurrencies like Bitcoin and Ethereum. Blockchain certainly has purpose beyond digital money, but superficially its practical use in the world of automobiles is a challenging one to see.
Given a little more thought, however, this is actually a fairly clever maneuver even if owners of GM and Ford stock can’t quite find the relevant connection.
Ford certainly is well aware that the future of the automobile business isn’t going to look like the past. The paradigm shift has moved from merely “selling cars” to “providing mobility.”
The company hasn’t done a great job of touting its transition, perhaps because it’s not even sure which of the spaghetti it’s throwing on the wall is actually going to stick. Some of these projects were actually quite compelling though.
Case in point: Early this year the Ford unveiled what it’s calling the Transportation Mobility Cloud. In short, the platform facilitates smarter traffic management so cars in use by ride-hailing services wouldn’t waste time and trips by being unoccupied.
A couple of years ago, Ford launched an app called FordPass, which allowed people to hail a ride or pay for a parking space all from their smartphone. Obviously a consumer would only need one or the other, and apps that do those jobs already existed at the time. The platform even worked when used for non-Ford automobiles.
The point was and still is, the vehicle market is changing. Even if nobody’s entirely sure what it will look like down the road, Ford’s preparing for a variety of possibilities by doing things it wouldn’t have done just a few years ago. And while its impact on Ford stock still is uncertain, it is reassuring to see them recognize the need for evolution.
Blockchain and Ford Stock
But blockchain? How does the foundation of cryptocurrencies fit into landscape of the automobile market?
It’s actually a misnomer to think the blockchain is only suited to be the basis of digital currencies. Indeed, cryptocurrencies are one of the least impressive applications of the technology.
In layman’s terms, blockchain is a digital ledger that can be updated as necessary. The ledger’s change can be initiated by an individual, but it would have to be verified by multiple computers specifically looking for inconsistencies or fraud. It is quite literally a chain of different data blocks that can serve a purpose far beyond digital currencies.
In this case it’s able to determine how far a vehicle has traveled, serve as a payment system for hailed rides, provide detailed information to insurance companies, help manage traffic flow, and more.
The newly-created Mobility Open Blockchain Initiative, or MOBI, which also includes tech giant International Business Machines Corporation (NYSE:IBM) and digital consulting outfit Accenture Plc (NYSE:ACN), said its mission was”
“[To] foster an ecosystem where businesses and consumers have security and sovereignty over their driving data, manage ride-share and car-share transactions, and store vehicle identity and usage information.”
And Ford Motors’ perspective? Vice President of Mobility Product Solutions Rich Strader simply explained, “We believe blockchain will transform the way people and businesses interact, creating new opportunities in mobility.”
One possible translation: Ford isn’t even entirely sure what will come of the alliance’s work, but that doesn’t mean it doesn’t want to be left on the outside looking in.
Bottom Line for Ford Stock
It’s clearly far from a reason to step into Ford stock.
That’s not to suggest it’s a step in the wrong direction. The melding of the Internet of Things with all industries is inevitable, as is the advent of seamless, wireless connectivity with the web.
The creation of MOBI, or at least something like it, was going to happen sooner or later. And, with or without the alliance’s help, Ford is going to continue making progress on this front because that’s just what companies do. From that perspective, the development is anything but earth-shattering.
From a more philosophical point of view, however, it is encouraging to see this old-school, blue-collar company so proactively embrace the idea that the world’s changing… fast.
In that light, with Ford stock priced at only 7.4 times its forward-looking earnings, the interest in blockchain at least somewhat bolsters the bullish argument.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can follow him on Twitter, at @jbrumley.