Despite news that Ford (NYSE:F) is preparing for another round of layoffs, the company just gave investors something to celebrate. The legacy automaker announced yesterday that it has received a $9.2 billion loan from the Department of Energy (DOE) to construct three new facilities to produce electric vehicle (EV) batteries. These factories will be located in Tennessee and Kentucky, helping bring jobs to both states. The Biden administration has been heavily focused on helping spur EV adoption in the U.S. for years. However, this loan to Ford marks its single largest financial commitment to creating an EV manufacturing network to date. On top of the clear economic benefits, it promises to be a growth-driving catalyst for F stock as the company gears up to continue its quest to dominate the EV market.
Does this mean that Ford is a stock to buy as EVs continue their central role in the green revolution? Let’s dive deeper into this news update and assess what it means for investors.
What’s Happening With F Stock
It’s true that F stock has been slipping today, largely due to Ford’s layoff news. However, it is important for investors not to miss the bigger picture when it comes to this week’s announcements. This government loan is the green light that Ford needs to keep expanding. It comes at a time when the EV battery market is red hot. Recent data indicates that it is expected to expand at a compound annual growth rate (CAGR) of almost 22% between 2023 and 2031. It is assigned a projected market value of $365.4 billion for that period.
The time for automakers to double down on EV batteries is now, and companies know it. International Ford rival Toyota (NYSE:TM) recently announced plans to expand its battery production operations. Ford needs to keep pace with its competitors both at home and abroad. Now, thanks to its incoming cash influx, it can do exactly that, establishing a presence in the U.S. among domestic battery builders. Per The New York Times:
“The loan will go to a joint venture created by Ford and its partner SK On called BlueOval SK, which will supply batteries for electric Ford and Lincoln cars and trucks. The factories, one in Tennessee and two in Kentucky, will employ 7,500 people and are among the largest such plants being built by auto and battery companies across the country, especially in Southern states. They are scheduled to begin production in 2025.”
Ford’s Electric Future
These factories won’t be open and operational for the next few years. However, this provides investors with a key opportunity to double up on F stock before they are. If Ford is able to start pumping out its own EV batteries, it will send shares soaring. As a legacy automaker, Ford has the resources to continue expanding its U.S. operations. Even as the predicted “great EV consolidation” sees smaller companies swallowed up by larger ones, Ford will remain untouched.
On top of that, its recent supercharger deal with Tesla (NASDAQ:TSLA) will only provide consumers with more incentive to purchase a Ford EV. While that also rings true for General Motors (NYSE:GM), Ford’s new battery production expansion will give the company the competitive edge it needs to continue conquering U.S. markets and beyond.
On the date of publication, Samuel O’Brient did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
