Ford pivots to energy storage after $19.5 billion EV write-down
Morgan Stanley analysts project $588 million in pre-tax profits for the new division, citing a strategic partnership with Contemporary Amperex Technology as a key competitive advantage.
Ford is restructuring its strategic focus towards the energy storage sector following a significant setback in its electric vehicle operations, which resulted in a $19.5 billion write-down in December. The company plans to commence customer deliveries of its new energy storage systems next year, targeting an annual production capacity of 20 GWh. This move positions Ford to compete directly with Tesla’s Megapack, which currently dominates the market with 80 GWh of annual capacity and deployed 46.7 GWh last year.
The pivot is driven by rising power demands from data centres and artificial intelligence companies, alongside the need for grid resilience. Ford noted in its blog that the convergence of data centre growth, renewable energy integration, and grid requirements has created a market gap. The company expects its new energy storage models to be profitable from the outset, contrasting with the losses incurred in its EV division.
Morgan Stanley analyst Andrew Percoco has expressed optimism regarding Ford’s venture, citing its partnership with Contemporary Amperex Technology (CATL) as a strategic competitive advantage. Percoco predicts pre-tax profits of $588 million for Ford’s energy storage business at full production capacity, implying a $10 billion enterprise value for the division based on a pre-tax earnings multiple of 17.5x.
While Ford aims to capture business from hyperscalers, it faces an entrenched incumbent. Tesla, which has also pivoted towards AI, is adding another 50 GWh of capacity in Houston. However, the shift in Tesla’s focus may provide Ford with an opportunity to secure at least some share of the growing energy storage market.
Concurrently, Ford is developing a $30,000 electric pickup truck, described as the “next Model T,” which is expected to reach showrooms next year. Despite these developments, Ford’s stock trades at a forward price-to-earnings multiple of approximately 7.5x, with a dividend yield that has fallen below 4.5% following a recent rally. The company’s quarterly dividend has remained static at $0.15 for the last four years.
