Ford’s dominance in commercial vehicles can’t last forever

Tesla widely recognized as America’s largest electric vehicle (EV) manufacturer, selling 228,700 EVs through the second quarter of 2022. But it might surprise you to learn that Ford Motor Company (F -0.20%) is second. That sounds impressive until you find out that the Dearborn-based automaker sold 22,979 EVs through Q2 2022 compared to 259,790 Tesla units.

But Ford’s numbers beat General machine(GM -0.23%) 7,674 units, Nissan Motor Company‘s (NSANY -2.29%) 7,622 units, Rivian Automotive‘s (RIVN 0.38%) 5,691 units, polish star‘s (PSNY -1.45%) 3,696 units, and clear group‘s (LCID -1.43%) 942 units during the same period, according to Cox Automotive. But the Koreans came quickly, with Kia Motors sold 17,623 units and Hyundai Motor Corporation (HYMTF 4.91%) sold 15,857 units. So far, most of Ford’s EV sales have come from the Mustang Mach-E, accounting for 17,675 units of 22,979 vehicles.

Ford’s dominance in the EV market includes electric vans, of which Ford currently holds 95% market share, selling 3,008 full-size electric vans E-Transit in the first half of 2022. But investors should not expect that large market share will continue, as the market for commercial vans will be increasingly competitive.

Ford’s Rivals

Given the company’s dominance in various segments of the truck market, that might not come as a surprise.

Ford’s early entry into the electric commercial truck market was prudent. A recent report by P&S Intelligence stated that the revenue of the US electric truck market is expected to reach more than $15 million per year by 2030, growing at a compound annual growth rate (CAGR) of 54%.

But Ford must not be complacent; The key in the market is the lack of competition. It won’t last long.

Consider Rivian. Its Amazon Prime van was the first vehicle to be delivered to customers in October 2020, and is custom-built for Amazon. Amazon ordered 100,000 units to replace its conventionally powered van by 2030. Built on the chassis of Rivian’s modular R1 steel skateboard, the electric truck will come in three sizes and can hold up to 900 cubic feet of cargo. They share a rear-mounted battery pack and electric motor, and have a range of 120 miles to 150 miles, more than the Ford E-Transit’s 126-mile range. Whether this van is offered to other customers remains to be seen. Amazon owns about 18% equity stake in Rivian.

Then there is General Motors which introduced its newest brand, BrightDrop, late last year. The EV600, its first model, is being built for FedEx, which is contracted for 500 units. The first batch was shipped late last year. The EV600 is built on GM’s new modular Ultium EV platform, also used for the GMC Hummer. The EV600 has over 600 square feet of cargo space and a range of 250 miles.

Ford E-Transit’s main rival, the Mercedes-Benz The Sprinter, got an electric model, the eSprinter, which is slated to debut later this year in Europe, with the US model sourced from the company’s factory near Charleston, South Carolina. Its 120-kWh battery pack will provide twice the range of the Ford E-Transit. Expect a variety of body styles, battery options and roof heights. Mercedes-Benz is also developing a new electric van architecture which is slated to debut in the middle of the decade.

Stellantis, which is also a major player in the ProMaster segment, is preparing to launch an all-electric version in 2023.

There are also start-ups vying for dominance in commercial vans, although their prospects remain uncertain due to their financial condition. One such startup is privately owned Bollinger Motorcycleswhich discontinued development of the all-electric B1 SUV and B2 pickup to concentrate on mid- and heavy-duty electric commercial trucks.

Just two months after telling investors there was “serious uncertainty” it would have the money to start production later this year, canoe (GOEV -3.99%), another EV company, getting orders from Walmart for 4,500 delivery vans.

Potentially crowded market

The importance of commercial vehicles is often overlooked, but they are proving to be a source of recurring revenue in services and parts, not to mention new vehicles. According to automakers, commercial customers turnover between 10-15% of their fleet each year. More and more, those vehicles will become battery electric vehicles.

As the fleet of vehicles takes off, Ford expects Ford Pro, the new name for its existing commercial arm, to generate $45 billion in revenue from new hardware and services by 2025 – up from $27 billion in 2019. Ford expects to generate additional revenue from e-services. -telematics, including fleet logistics, fleet management and charging.

More broadly, Ford remains the market leader in gasoline-powered commercial vehicles, with 40% market share in the US, and 15% in Europe. It wants to continue that dominance as the vehicle fleet is electrifying. But given the large number of automakers targeting the commercial electric van segment, they are all eyeing the market leader in that segment.

Investors should be aware of the success of start-up sales in this segment, as it could have a real impact on Ford’s future profitability.

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