Ford (NYSE:F) recently paused work on its $3.5 billion battery plant in Michigan as analysts fret about the legacy automaker’s future in electric vehicles (EVs). Now, F stock is trading slightly lower today.
Shares of Ford are down about 18% from the July high of $15.42. F stock currently trades at about $12.50 per share and a market capitalization of $50 billion. Ford has a trailing price-to-earnings (P/E) ratio of 12.21 while its 15 cent quarterly dividend yields nearly 5%.
F Stock: Failing the EV Market Test
Investors are increasingly anxious that Ford can’t compete against the likes of Tesla (NASDAQ:TSLA) and China-based electric vehicle makers.
The company sold just 7,000 battery electric vehicles (BEVs) in August and recently slashed the price of its F-150 Lightning pickup. Ford also signed a deal boosting the pay of its Canadian workforce by “as much as 25%” while continuing to face a U.S. strike by the United Auto Workers (UAW) union, which has idled plants.
Until recently, Ford had been accelerating in 2023. Sales were on track to reach nearly $170 billion — up nearly 10% from last year — and to deliver billions in profit. Estimates are now in question due to the strike, however, which is limiting production now and could limit profits later.
One problem is that Ford’s EVs, such as the F-150 Lightning and the Mach-E Mustang, are clones of its heavy gas-powered vehicles. This gives them driving ranges between roughly 200 and 300 miles with current batteries and America’s charging networks are struggling to catch up. Meanwhile, Tesla dominates as its charging plug becomes a standard. Charging rivals like ChargePoint (NYSE:CHPT) and Volkswagen’s (OTCMKTS:VWAGY) Electrify America are drawing poor reviews.
As a result, F stock is up just 7% so far this year while Tesla, despite its sky-high fundamentals, has more than doubled year-to-date (YTD). Ford still has a positive return on equity but its future appears uncertain.
What Happens Next?
While politicians have bet heavily on Ford, the automaker has failed to deliver anything for the middle market so far and will be vulnerable to Chinese EV competition as soon as it arrives in the States. In my view, Ford remains a value trap.
On the date of publication, Dana Blankenhorn did not hold (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.