Ford (NYSE: F) is one of the oldest and most iconic automobile manufacturers in the world. The company’s founder, Henry Ford, is widely credited with launching the modern automobile industry by creating a mass market for cars.
Ford is currently ranked the fifth most valuable automotive brand in the world by Statista and the seventh largest car manufacturer by Forbes. It manufactured around 5.97 vehicles at 90 plants worldwide in 2014. Ford’s major products are passenger cars and light commercial vehicles (trucks and vans); it produced around 3.231 million passenger cars and 2.64 million light commercial vehicles in 2014. Ford also built 94,845 trucks in the same year.
Ford’s current assets include 90 factories, two automotive brands—Ford and Lincoln—and the Ford Motor Credit Company. Ford reported revenues of $141.95 billion on June 30, 2015. Ford’s largest market is the United States, where it generated $82.67 billion in revenues in 2014, according to Statista; Ford’s share of the global automotive market increased by 4.48% in 2014.
To help investors better understand Ford and the automotive market, here is a brief rundown of the company’s Strengths, Weaknesses, Opportunities and Threats, or SWOT:
- Strong position in the American auto market. Ford’s U.S. market share in the market for cars and light trucks in August 2015 was 14.8%, making it number two to General Motors Corporation.
- Ford’s biggest market is the United States, which has been doing better economically than the two other large markets, China and Europe, in recent years.
- Ford has some popular models, including the F150 pickup truck, the Transit Connect work van, the Fusion sedan and the Explorer SUV.
- Strong financial position. Ford reported a free cash flow of $3.477 billion in June 2015.
- Proven expertise in manufacturing, research and development and automobile marketing.
- Strong dealership network. Ford currently has 7,500, according to Automotive News.
- Ford’s expertise in the manufacture and marketing of light commercial vehicles, particularly vans. The demand for commercial vans is growing because of the increasing demand for delivery service created by growing e-commerce.
- Inability to match the production capabilities or sales volume of the top five automakers: Toyota, Volkswagen, General Motors, Renault-Nissan and Hyundai Kia. Both Toyota and Volkswagen produced over 10 million vehicles in 2014, or twice as many as Ford data provided by Statista indicates.
- Poor reputation of American auto brands compared to European and Japanese competitors. Lincoln in particular is widely considered an inferior product to British and Germany luxury cars, even in the United States.
- Heavy dependence on U.S. and European auto markets. Most experts believe future growth in car sales will be in emerging markets such as China and India.
- Large operations in Europe, where car sales have been stagnant in recent years.
- Ford’s reputation as a working- or middle-class brand, which makes it hard to market vehicles to the upwardly mobile.
- Heavy reliance on pickup truck sales. Pickups have limited appeal outside the North American market.
- Dependence on some national auto markets that are in recession because of falling prices for natural resources, such as Russia, Brazil and Canada.
- Ford’s reputation as a staid, conservative brand, which makes it harder to market to younger consumers.
- Low stock price $15.26 a share on October 19, 2015.
- Poor reputation with investors, which can limit the company’s ability to raise capital. Ford had a market capitalization of just $60.55 billion on October 19, 2015.
Opportunities for Ford
- New automotive technologies, such as self-driving or autonomous cars. These could increase demand for new models and sales. The publicity-generated new technologies could also increase interest in car purchases.
- Volkswagen’s diesel scandal. Ford has not marketed any diesel-powered vehicles in the United States, which means it will not be hurt by the scandal. Ford could take some market share by marketing disgruntled Volkswagen customers. Volkswagen will lose the competitive edge that diesel mileage gives it.
- Ford’s alternative fuel cars, particularly the C-Max Electric and the Fusion hybrid, which are not dependent on diesel. Ford is marketing a C-Max electric plug-in hybrid. The market for these is growing, particularly with concerns about air pollution and a growing suspicion of electric cars created by the Volkswagen scandal.
- Growing auto markets, particularly in expanding economies such as China, Mexico and India.
- New uses for vehicles, such as app-bases serviced like Uber and Lyft and short-term rental services like Zipcar. These could create new markets for vehicles and for vehicle financing.
- Increased levels of e-commerce, which could increase the demand for light commercial vehicles that are used for delivery. Ford manufactures one of the most popular delivery vehicles: the Transit Connect work van.
Threats to Ford
- The growing presence of German and Japanese automakers in the vital North American auto market, particularly Volkswagen and Toyota. Toyota is now competing directly with Ford in the pickup truck market, and Volkswagen is considering entering that market. Mercedes and Nissan are now competing directly with Ford in the commercial van market.
- Some companies have a head start in alternative fuel vehicles. Toyota and Honda are ahead in the production of fuel cell vehicles. Volkswagen has greater expertise in electric cars.
- Widespread adoption of electric vehicles could force costly upgrades to plants and expensive changes to dealerships. This could reduce Ford’s profits.
- Lower fuel prices could limit demand for costlier alternative fuel vehicles such as hybrids and electrics.
- The Volkswagen scandal could limit the demand for diesel-powered vehicles, including the Ford F150.
- Today’s young people are driving less than previous generations, news stories indicate. This means less interest in cars and could lead to fewer car sales at some point in the future.
- Some experts predict that new technologies, such as Uber and self-driving vehicles, could limit the market for cars and financing. This could limit vehicle sales volume at some point.
Like all auto companies, Ford is facing a radically changing auto industry. New technologies are creating threats and opportunities that will redefine the automotive market in the years ahead.
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