The News: Ford CEO Jim Farley is signaling to Wall Street that Ford’s “Pro” fleet business is the future of the auto industry. “If you’re looking for the future of the automotive industry, […] look at Ford Pro. It’s got half a million subscribers with 50% gross margin,” Farley said during a conference following Ford’s latest earnings call. Ford expects the Pro unit’s pretax earnings to grow to somewhere between $8 billion and $9 billion in 2024, which puts it in the same range as its “Blue” traditional business ($7 billion to $7.5 billion). Details about Ford’s latest earnings, which highlights the Ford Pro unit’s performance, can be found on Ford’s media page.
Ford Pro Looks to Be on a Growth Trajectory
Analyst Take: One of the more interesting details I spotted in Ford Motor Company’s latest earnings report last week was the segment focusing on Ford Pro, the business unit that Ford describes simply as “the global leader in work” and working on “understanding the needs of and developing solutions for commercial customers.” As it turns out, Ford Pro looks to be on a growth trajectory, more than doubling its 2022 numbers with full year revenue growth of 19% and EBIT of $7.2 billion (and margins coming in at a very respectable 12.4%).
Ford Pro incorporates elements of the automaker’s traditional fleet and commercial businesses and is increasingly focused on leveraging software-defined vehicle technology solutions like EV technology, telematics, connectivity, and logistics to build out an ecosystem of services and value-add solutions designed specifically for commercial customers, from SMBs to enterprise-sized businesses.
Part of the group’s success can be attributed to a series of launches within Ford Pro’s “primary vehicle franchises,” namely new super-duty trucks in the North American market and transit custom vans in the EU. But what caught my eye was Q4 software subscriptions growing almost 50% year-over-year (YoY), and orders for mobile repairs exceeding that 2x growth mark. This is significant because it speaks to six important trends in Ford’s ecosystem that may be starting to gain traction, the opportunity for:
- Commercial customers
- Technology partners
- Infrastructure partners
- EVs
- Software-defined vehicles
The Opportunity for Commercial Customers
50% growth YoY in software subscriptions and mobile repairs speaks to broad market needs on the customer side of the service equation. Ford Pro’s broad offering of fleet and vehicle management solutions, which range from vehicle tracking and driver monitoring to anti-theft and diagnostic services, addresses a wide range of needs for commercial customers in a relatively frictionless way while minimizing risk and liability. Ford Pro’s growing menu of services seems to have already struck the right chord with commercial customers, and margins suggest that price-points may have landed on or near the sweet spot for the segment. From a customer’s perspective, having Ford – the vehicle OEM – directly tied into both the technology implementations and the vehicles that make these services possible, probably makes the offering a lot more attractive than working with a hypothetical third-party provider / middle man, providing a direct line of communication between customers and the Ford ecosystem they are already familiar with (including dealers), reducing uncertainty and risk during the decision-making process, and neatly consolidating critical vehicle acquisition and fleet management solutions to minimize operational friction. Even before digging into a detailed discussion about ROI, the concept itself seems on-target, and 2023’s numbers appear to bear this out already.
The Opportunity for Technology Partners
Many of Ford Pro’s new wave of services leverage the types of features already commonly available in software-defined vehicles: cameras and sensors, GPS, connectivity, ADAS, diagnostics tools, anti-theft and vehicle recovery, and so on. Because adapting these technologies’ capabilities to the specific needs of commercial fleets is already creating new use cases and utility for commercial customers, the value equation of these technologies is quickly changing from optional “add-ons” to “must-have” features. As Ford Pro’s services continue to gain traction with commercial customers, demand for these features and the components and platforms that enable them is likely to scale. The potential for deeper penetration of vehicle technology solutions in the commercial segment, particularly in underserved areas of key markets like the United States, is good not only for Ford Pro and its commercial customers but for Ford’s technology partners.
The Opportunity for Infrastructure Partners
Ford Pro’s go-to-market strategy, particularly in states where new automotive infrastructure has been slow to scale, has been to partner with utilities to accelerate the deployment of next-generation automotive solutions, thereby eliminating adoption hurdles for commercial customers looking to bring EVs and software-defined vehicles into their fleets. One example is the partnership between Ford Plus and Xcel Energy to bring more EV charging stations to commercial customers in several central states. I expect more such partnerships as the program scales to the rest of the country. The more obvious opportunities for such infrastructure partnerships are with energy utilities, carriers, and ISPs, but I expect that a broader ecosystem of infrastructure partnerships could, at some point, also include recycling, upcycling, and circularity infrastructure.
The Opportunity for EVs
Commercial customers are increasingly testing the viability of EVs – for a variety of reasons, from reducing fuel costs, minimizing their carbon footprint, and improving their public image to taking advantage of subsidies and tax advantages. Unfortunately, many US states have remained underserved by EV charging infrastructure, making EV adoption difficult for even the most motivated businesses. Ford Pro’s partnership with energy utilities to make charging stations available to commercial customers, particularly in underserved markets, helps create an adoption channel for businesses that otherwise might not be able to support EVs, let alone an EV fleet. Making the operation of EVs more accessible to businesses by facilitating the buildout of charging infrastructure for the commercial segment will help EV adoption scale in these areas.
The Opportunity for Software-Defined Vehicles
Ford Pro’s comprehensive suite of commercial vehicle technology solutions takes full advantage of just about every software-defined vehicle feature, from cameras and sensors to connectivity and onboard intelligence. If they want to, businesses can track their commercial vehicles and see exactly where they are at all times. They can disable them as needed. Cameras and sensors can be used to monitor drivers for unwanted behaviors like speeding, dangerous driving, overloading the cargo area and smoking inside the vehicle, and can also capture incidents for insurance purposes, from vandalism and attempted theft to traffic accidents. Businesses can also gauge distance and time-to-destination (useful for delivery and service vehicles), track energy usage and efficiency, optimize charging schedules, and send out notifications if a part or component requires maintenance or repairs. These types of value-add features can help commercial customers improve their fleet efficiency, reduce liability, and deliver significant cost savings over time, making the case for the value of software-defined vehicles in commercial use cases.
Ford’s reinvention of what services catered to the commercial segment should look like in the age of data, software-defined vehicles, and automotive electrification is already shaping up to be a case study in, on the one hand, business innovation, and on the other, the power of scaling industry partnerships to create on-ramps for adoption, opportunity, and growth. Helping reinvigorate EV adoption in the commercial segment would be a clever business development initiative on its own, but when added to the growing menu of renewable, scalable services offered to commercial customers, it isn’t surprising that Ford Pro on the whole is already producing impressive results. Expect updates and deeper dives into the business unit’s innovations and progress throughout 2024.
Disclosure: The Futurum Group is a research and advisory firm that engages or has engaged in research, analysis, and advisory services with many technology companies, including those mentioned in this article. The author does not hold any equity positions with any company mentioned in this article.
Analysis and opinions expressed herein are specific to the analyst individually and data and other information that might have been provided for validation, not those of The Futurum Group as a whole.
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Author Information
Olivier Blanchard has extensive experience managing product innovation, technology adoption, digital integration, and change management for industry leaders in the B2B, B2C, B2G sectors, and the IT channel. His passion is helping decision-makers and their organizations understand the many risks and opportunities of technology-driven disruption, and leverage innovation to build stronger, better, more competitive companies. Read Full Bio.
