By song Jiating
Ford may be reaping its best report card in two years.
According to the latest financial report of the third quarter of 2020 released by Ford Motor, the company’s revenue in the third quarter was 37.5 billion US dollars, up 1% from 37 billion US dollars in the same period of last year, and the net profit was 2.4 billion US dollars, which was 465% higher than that of 425 million US dollars in the same period of last year.
In addition, Ford’s third quarter net profit margin was 6.4%. According to the adjusted EBIT of US $3.6 billion, the adjusted EBIT margin was 9.7%.
So far, Ford’s net profit in the first three quarters of this year has reached 1.5 billion US dollars. In addition, Ford added $11.1 billion in operating cash flow in the third quarter, with an adjusted free cash flow of $6.3 billion. According to the financial report, as of the end of the third quarter, it held nearly $30 billion in cash and more than $45 billion in liquidity.
Ford also paid off its previous loans. It is understood that Ford borrowed $15 billion in revolving credit at the beginning of the first quarter to maintain financial flexibility. After repaying $7.7 billion at the end of July, Ford said it had fully repaid the loan by the end of the third quarter.
Ford, which is “debt free and light”, then, or as Jim Farley, Ford’s president and CEO, said, began to focus on new businesses such as electric vehicles and autonomous driving. In early October this year, Ford announced plans to adjust its personnel, core business objectives and organizational structure, including software, data, vehicle models and new energy vehicle business.
New business potential
In the third quarter, Ford’s financial data performance was higher than market expectations, which is not easy at the moment when the epidemic is still spreading. In this regard, Jim Farley believes that Ford’s rebound is mainly due to the improvement and improvement of the company’s operation execution, and focuses on the high growth and high return model products with competitive advantages.
Ford pickup truck series is the “rescue rider” of its North American market. During the epidemic period, the pickup truck series represented by Ford F-150 had a higher than expected demand for automobiles, and the pricing of such models was relatively high. Under the double blessing, it directly generated 3.2 billion US dollars of revenue for Ford’s North American market, and the profit margin was as high as 12.5%. Excluding the car part that Ford has abandoned, Ford’s retail sales in the third quarter increased by 1.3% year-on-year.
But Ford’s growth may be more than that. AI financial news agency noted that among Ford’s $37.5 billion revenue in the third quarter, automobile revenue was about $34.7 billion, which means that Ford’s previous investment in new business areas such as automatic driving has begun to pay off.
In fact, this has been reflected in Ford’s second quarter report. Ford’s net profit in the second quarter was $1.1 billion, which was due to a $3.5 billion investment in Argo AI, a self driving platform company. If this part of the income is not calculated, Ford’s second quarter net profit is still a loss.
Ford invested $1 billion in Argo AI, which was just founded, in 2017, and then joined Volkswagen to share the cost. Now it looks like the deal is worth it.
In addition to the return on investment, Ford has made great progress in autonomous driving with Argo AI. In October this year, the two announced the launch of the fourth generation of automatic driving test vehicle based on Ford Escape Hybrid Model in the United States, and carried out automatic driving technology test in six cities in the United States.
Ford also revealed in the third quarter that the company had received its first order revenue from a vehicle operator in Austin, Texas.
In addition, Ford began to vigorously promote the electric vehicle program. Ford said it would have 12 electric models worldwide, including hybrids, by the end of this year. In the fourth quarter, the Ford brand will launch the new Ford F-150 and its hybrid version, as well as the world’s first pure electric SUV Mustang mach-e. at the same time, in November this year, Ford will also launch a pure electric model of Ford Quanshun.
Ford’s long-term goal is to build a complete electric vehicle ecosystem. In fact, Volkswagen and Toyota also have this ambition, but in the view of industry insiders, this is not a one-day feat. The first test that giants need to accept is the performance of their electric vehicle “group army” at the market level.
The Chinese market is still important
Despite the ups and downs in the Chinese market in the past few years, Ford still needs the Chinese market, whether it is improving global performance or realizing its ambition to transform electric vehicles. After all, China is the world’s largest market for electric vehicles.
The good news is that Ford’s performance in China has improved significantly since the second quarter of this year. Taking the third quarter as an example, Ford sold 164352 vehicles in China, up 25.4% year on year. Among them, the Ford brand sold 87131 vehicles in the third quarter, a year-on-year increase of 12.5%, achieving the first quarter sales growth in nearly 15 quarters.
Ford’s luxury car brand Lincoln and commercial vehicle Jiangling also achieved double-digit year-on-year growth. Among them, the Lincoln brand sold 19143 new cars in the third quarter, with a year-on-year growth of 64.8%, and achieved a year-on-year and month on month growth for five consecutive months. Such an increase is commendable in the second tier luxury car brands.
In terms of commercial vehicles, the whole range of pickup trucks, light trucks and light buses of Jiangling brand increased significantly in the third quarter, which also set the best sales volume in the third quarter in history.
AI financial news agency learned that up to now, Ford’s market share in China has achieved year-on-year growth for three consecutive quarters, and its profit before interest and tax has also increased for two consecutive quarters.
Ford’s rebound in the Chinese market, first of all, depends on the strong demand driven by China after taking the lead in lifting the epidemic control measures. In this regard, the Chinese market is the blessing land for all multinational automobile enterprises.
What’s more, it’s Ford’s own efforts, such as a strong product offensive. In the first half of this year, Ford and the joint venture launched new models such as the new Ford Ruiji, the 2020 Mondeo and the new Ford Explorer, which played an important role in improving the overall sales. At the same time, the proportion of the total sales volume of these medium and high-end models has been greatly increased, which not only improves the proportion of product structure, but also promotes the profit level of dealers.
Chang’an Ford, a joint venture of Ford in China, has also made great changes in channel construction and after-sales service, such as no longer targeting sales volume and focusing on win-win situation of manufacturers. These measures are the main reasons for its bottoming out and rebound this year. In the first three quarters of this year, the cumulative sales volume of Changan Ford reached 167100, up 29.65% year on year. This number may not be much compared with other joint ventures, but it is not easy for Changan Ford.
For the current Ford China, how to maintain a stable growth trend is particularly important.
In fact, in the past few years, Ford’s structure in the Chinese market and personnel appointment and removal has been in a state of constant adjustment, which has laid a hidden danger for its stable growth. How to contribute more increment to Ford’s global market depends on the stability of Ford’s Chinese market. This may be the next thing Ford should think about and solve.