Ford: Autonomous cars may be 20% of U.S. sales by 2030
Ford Motor Co. executives say the automaker’s investment in autonomous cars and new transportation services will hurt in the short term, but will set up the company for long-term success.
Ford President and CEO Mark Fields said Wednesday at the company’s annual investor day that Ford’s 2017 financial results will fall from the $10.2 billion the company expected to earn this year as Ford invests in ride-sharing shuttles and other services. But the company’s fortunes will pick back up in 2018, executives say, and those emerging opportunities could offer profit margins of more than double what Ford makes selling cars and trucks.
“As we expand to be an auto and a mobility company, we’re not moving from an ‘old’ business to a ‘new’ business. We’re moving to a bigger business,” Fields said in a statement. “The world is moving from simply owning vehicles to owning and sharing them. That’s why we are expanding to sell more vehicles and provide transportation services at the same time.”
Ford’s investor day presentations, Fields said, were meant to convince Wall Street that Ford, “is a solid investment with an attractive upside on emerging opportunities.”
As has been the case in recent years, investors shrugged off the news. Ford stock closed Wednesday at $12.14 a share, down 1.94 percent for the day.
Executives from across the company detailed how they plan to continue to have a strong core business while methodically expanding into new services and technologies such as driverless vehicles. Fields said those opportunities could offer profit margins of 20 percent, while its target for margins in its core business is 8 percent.
Ford is investing heavily in autonomous cars because it believes driverless vehicles could account for 20 percent of industry-wide U.S. yearly sales by 2030. Of that 20 percent, Fields said 80 percent will be in fleets, while 20 percent will be for personal use.
Executives believe the company has the potential to earn $3.7 trillion of the transportation industry’s $5.4 trillion in annual revenue from emerging mobility opportunities such as ride-hailing and car-sharing services.
The automaker’s leadership sees the biggest chance to make money off retail and finance, followed by mass transit. The company expects the mass transit sector will account for $900 billion of the potential $3.7 trillion the industry could earn.
Ford’s already investing heavily in that space. Last week it acquired Chariot, a shuttle service based in San Francisco that it plans to expand to five additional markets in the next 18 months. Chariot is working to deploy fully autonomous cars for a commercial ride-hailing or ride-sharing service in 2021.
By targeting its autonomous vehicle for a ride-hailing or ride-sharing service, Ford said it can reduce the cost of traveling. Traditionally, owning a vehicle has cost between 70 cents and $1.50 a mile, it says. Ford’s autonomous ride-hailing or sharing vehicles could reduce the cost to about $1 per mile — on par or even less than personal ownership.
The company also sees money to be made off insurance, motorcycle and taxi services.
Ford projects that driverless cars will represent 20 percent of U.S. yearly sales by the end of next decade. If those figures were applied to today’s record-level auto sales, Americans would have bought about 3.5 million self-driving vehicles.
Ford also expects 10 percent of all miles traveled will be autonomous by 2030.
Ford says it will still focus on its core business of selling cars and trucks, and reiterated a number of plans, including a $4.5 billion investment in electric cars it announced last December, as well as maintaining leadership in the truck and van segments.
The company also is refocusing how it sells small cars, trying to reduce its cost footprint in a segment that not many customers want. It reduced Ford Focus buildable combinations from 200,000 in 2015 to approximately 300 for the 2017-model year and 30 for the next-generation Focus.
That’s saving the company about $300 per car, Ford said.
Ultimately, Ford predicts a pre-tax profit of about $10.2 billion this year, down from earlier estimates of $10.8 billion, which it earned last year. The company estimates it will earn about $1 billion in the third quarter, or about 10 percent of the full-year results.
Ford said full company results are expected to decline in 2017 as it invests in emerging opportunities, but will improve in 2018.
Despite the short-term dip, Chief Financial Officer Bob Shanks stressed that Ford is capable of surviving an economic downturn. Earlier this year, it said the company would remain profitable if the auto industry entered a severe recession and U.S. sales plummeted 30 percent in a single year.
“We are not the Ford of the past,” Shanks said.