The News: Ford Motor Company reported first quarter (Q1) revenue of $42.8 billion, net income of $1.3 billion, and adjusted EBIT of $2.8 billion. Revenue from Ford Pro commercial customers jumped 36% and EBIT more than doubled, driven by high demand for Super Duty work trucks, Transit vans, and software and physical services. Ford Blue’s global product lineup, which includes new versions of F-150 and Ranger trucks, saw hybrid volumes on pace for 40% full-year growth. Full-year adjusted EBIT is tracking toward $10 billion to $12 billion, with CAPEX guidance tightened to $8 billion-$9 billion. Read the full press release here.
Ford Q1 2024 Earnings Show Ford Pro’s Momentum Is Accelerating
Analyst Take: Ford’s Q1 2024 numbers reinforce the operating theory that Ford’s “segmented, customer-centered” (diversified) strategy puts the company on a healthy track for continued growth. Ford’s revenue for Q1 2024 was $42.8 billion, a 3% upward bump year-over-year (YoY) even as vehicle shipments softened. Point of note: The company increased its YoY revenue for 3 years straight and expects to do so again in this year. Net income for Q1 was $1.3 billion. Adjusted earnings before interest and taxes, or EBIT, totaled $2.8 billion.
Ford Pro as the MVP
In a repeat of Q4 2023, the MVP for me this quarter is Ford Pro, which Ford President and CEO Jim Farley highlighted in his comments: “Nowhere is that momentum more apparent than in Ford Pro, which helps commercial customers improve the productivity of their organizations.” He continued, “The Ford Pro team is growing volumes, revenue, and profitability – including EBIT margin – and services capabilities. We’re seeing real evidence of what’s possible for customers and the company across all our segments, and applying what we’re learning about things like mobile services and value-added software to our retail businesses.”
Ford Pro’s Q1 2024 revenue totaled $18.0 billion, up by an impressive 36% YoY, with EBIT of $3.0 billion. “The segment’s EBIT margin of nearly 17% exceeded the sustained mid-teens margin target set for the business,” Ford shared in its earnings release, highlighting higher production of Super Duty trucks and Transit vans. (Note: This includes the 2024 North American Truck of the Year and the most dependable large heavy-duty pickup after 3 years of ownership, according to J.D. Power.)
Ford finally shared a bit of color about the scale and penetration of its Ford Pro program, focusing on a key aspect of its business, fleet electrification, pointing to the United States Postal Service’s fleet of 9,250 E-Transit vans and Ecolab’s more than 1,000 F-150 Lightning pickups and Mustang Mach-E SUVs). Not all of Ford Pro’s customers are high-volume customers, however, and the business unit has been proactively building an attractive long tail strategy for small and midsize businesses (SMBs) across the US in recent months. One of its most notable programs has focused on delivering charging solutions to businesses of all sizes in underserved states and rural areas, partnering with utilities to accelerate and scale that footprint. The program aims to reduce barriers of entry into the EV segment for businesses large and small by helping secure charging infrastructure for their facilities and job sites. Making it easier for businesses to either electrify their fleets or test the viability of commercial EVs through pilot programs is a great strategy not only for Ford Pro itself but for Ford more broadly, as it creates an on-ramp for adoption in markets that would have otherwise passed on commercial EVs by default.
Software and Physical Services
Driving demand for commercial-grade EVs is not Ford Pro’s only focus, however. Roughly 13% of Ford Pro’s EBIT in the past 12 months has come from software and physical services (a number that Ford Pro expects to grow to 20% by 2026). Case in point: Software subscriptions alone grew 43% YoY to more than 560,000 at the close of the quarter. In my view, this is one of Ford Pro’s most interesting and consequential ideas: leveraging software-defined vehicle features to provide intelligence, insights, and additional controls to fleet managers and small business owners looking to minimize risk, maximize uptime, and extend the lifecycle of the vehicles their businesses depend on.
These software services keep expanding but they already currently include a rich package of data analytics that can help track vehicle location and speed, identify potential problem behaviors by drivers (such as speeding, braking, and cornering too hard; inattentive behavior behind the wheel; even intoxication), optimize fuel and energy efficiency, manage charging, flag potential maintenance issues or imminent mechanical failures, and so on. For reference, Ford Pro’s Intelligence platform already monitors and analyzes over 1 billion datapoints per day from Ford commercial vehicles.
The preventative maintenance piece of these services looks like an opportunity for Ford to bring more predictable growth to its parts and accessories business, but it also creates a compelling value proposition for commercial customers who depend on maximum up-time for their vehicles. Ford Pro’s customer support platform for commercial vehicle center (CVC) dealers, dubbed FordLive, integrates connected vehicle data, diagnostic data, diagnostic trouble codes (DTCs), software, and enhanced customer support to predict when a vehicle will need service, and will then proactively schedule service and order parts to decrease a vehicle’s time spent in service from days to mere hours. Ford Pro estimates that, globally, it saved customers 332,000 days of downtime in Q1 2024.
Vehicles can also be immobilized to prevent theft, and localized to recover them should they fall into the wrong hands. Ford Pro will likely continue to add features that help businesses reduce costs and risk and maximize up-time, vehicle lifespans, and operational profitability. The unit is already off to a very good start, and judging from the numbers already, commercial customers seem to be buying into its offerings’ ROI.
To give you some idea of where Ford Pro is (and bear in mind that this is still very early days), the business unit is already seeing about a 12% attach rate on subscription services across over 4 million connected commercial vehicles in operation today. With a YoY growth rate of 43%, Ford Pro software subscriptions have reached 560,000, but as the number of vehicles equipped with modems expands from 30% to 60% by 2026, subscription service attach rates are expected to grow from 12% to 36%.
Consumer Segment Numbers
Ford Pro’s numbers are all the more encouraging when weighed against softening EV sales in the consumer segment. Looking at Ford Blue, revenue and EBIT were slightly down for the quarter despite delivering profitability in every market. Sales of Ford Blue’s hybrid vehicles were up 36% for the quarter, tracking with the company’s sales growth projections of 40% for the year. For reference, the compact Ford Maverick was America’s No. 1-selling hybrid truck in Q1. Ford noted that hybrid versions of the new F-150 full-size pickup are on the way, with further expansion of hybrid vehicles around the world, including plans to offer hybrid options of every vehicle in its North America portfolio by the end of the decade. The company reported that the EV segment had an EBIT loss of $1.3 billion, but with costs remaining flat YoY.
A bit of good news is that availability of reliable DC fast-charging infrastructure is more than doubling for Ford EV customers in the US and Canada, with adapters that will make more than 15,000 Tesla Superchargers available to Ford EV customers. This is in addition to Ford Pro’s commercial EV charging investments. Despite some temporary softness in EV sales in the consumer segment, Ford Pro is driving more commercial customers to electrify their vehicle fleets, highlighting the importance of adequate charging and services infrastructure to mitigate barriers of entry and the perceived risks of investing in “new” technologies. By solving this problem for the market, Ford Pro is effectively building an on-ramp for EV adoption in the commercial segment, which tends to be a bit more risk-averse than the consumer market has been.
This also highlights the degree to which the commercial sector plays an important role in electrification. Note that demand on the commercial side is fundamentally different than in the retail segment. (Retail customers do not replace or add new fleet vehicles every 3-5 years like businesses do.) An interesting potential side-effect of positive employee EV experiences that I would like Ford to dig more into at some point is the extent to which those positive experiences may impact their EV purchase intent – particularly in terms of performance and UX, but also regarding concerns or apprehension about charging. As Ford Pro EV adoption continues to rise among more than 40% of commercial customers, I expect this would be an interesting sales funnel insight for Ford’s F-150 Lightning business. For context, the number of F-150 Lightning commercial customers grew by roughly 40% in 2023, with indication that Q1 2024 sales of F-150 Lightning orders included a significant proportion of repeat Lightning customers.
E-Transit Vans
Turning to E-Transit vans, registration data suggests that E-Transits already serve more industries than any other electric van, but the data point that caught my attention is that E-Transit vans have saved customers more than 3 million gallons of gas (and an estimated 25 million kgs of CO2 output) since 2022. Based on the EPA’s Greenhouse Gas Equivalency Calculator, that is equivalent to planting 413,377 tree seedlings and letting them grow for 10 years.
Another interesting data point is that 25% of E-Transit sales are currently going to state and local government customers. This is a good segue way into the government sales opportunity for Ford Pro – a topic I would like to see more focus on in future earnings discussions. My suspicion is that thanks to public sector efforts to drive toward zero-emissions, Ford Pro is already finding fertile ground for commercial EVs and Ford Pro services adoption among municipalities, emergency response, police agencies, and city services. To date, 14 of the top 20 Lightning Fleet Customers are state and local governments, and eight of the top 20 E-Transit Fleet Customers are state and local governments.
Final Highlight
Another highlight from the Q1 earnings call was Morgan Stanley analyst Adam Jonas’ observation that “at 10x EBIT, [Ford Pro] can be worth double Ford’s entire market cap.” Not that I endorse the statement or the prediction, but it does speak to Ford Pro’s momentum and to its obvious potential both as a profitability engine and revenue growth center.
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.
Other Insights from The Futurum Group:
Ford Pro Looks to Be on a Growth Trajectory
Ford Pro and Xcel Energy Announce Unique Partnership
Market Insight Report: Electric Vehicle Market
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.
