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There’s Still Gas in Ford’s Tank

There’s Still Gas in Ford’s Tank

Andrew Willis:

With so much attention on electric vehicles lately, it’s easy to forget about the old "gasoline" automakers. But the Teslas of the world have spurred these legacy brands to improve and adapt faster than ever--and this could mean missed opportunities for those writing off the likes of good ol’ Ford F.

Now Ford might not be one of the first companies you’d expect to give Tesla a run for their money. However, their finances are much better than they used to be, and gasoline trucks are still very popular, which is helping them move fast on the electric-vehicle front.

Recently, Ford has been focused on paying off debt and developing its electric-vehicle offerings, while simultaneously reducing costs and increasing scale. The new Mach-E electric Mustang is already in production at one factory, with another coming on line soon.

Sector strategist David Whiston thinks Ford will eventually turn itself around, but when that happens is still uncertain. There are also concerns about the company’s moat--or sustainable competitive advantage--since vehicle manufacturing is a very capital-intensive business but barriers to entry aren’t as high as they used to be.

That said, competitors will have to face the reality that 75% of new light-vehicle sales in the U.S. still comprise of light trucks--which is Ford’s wheelhouse. And while it will be expensive to transition old production lines to make electric vehicles, Ford may be also able to take advantage of existing investments to produce an electric vehicle that is profitable from the start.

For Morningstar, I’m Andrew Willis.

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Andrew Willis

Senior Editor
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Andrew Willis is senior editor for Morningstar Canada, covering stocks, alternative assets, funds, and personal finance. He is the writer and host of two weekly stock features, including Morningstar's Stock of the Week.

Willis previously produced content for Fidelity Investments and finance industry events for Euromoney Institutional Investor. He has also written for Thomson Reuters and CNN.

Willis holds a bachelor's degree in business administration from Bishop's University and a master's degree in journalism from the University of Hong Kong. Follow him on Twitter @Andrew_M_Willis.

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