In his State of the Union address on Tuesday, President Joe Biden did not mention Tesla or its products. Biden, on the other hand, brought up Ford Motor and General Motors, evoking the ire of Tesla CEO Elon Musk. During a speech on Wednesday that resembled a mini-State of the Union address for Ford (ticker: F), CEO Jim Farley opted to highlight Tesla (TSLA) as well as other companies. Farley was outlining ambitious ambitions to fundamentally transform the 119-year-old corporation that he oversees. Everything about the rearrangement appears to be a dramatic attempt to apprehend Tesla. Tesla has received a number of snubs from the president in recent months. When it comes to electric car investments in the United States, Biden prefers to use the names General Motors (GM) and Ford to illustrate his point.
Biden did it once more on Tuesday. After saying “Ford is investing $11 billion in electric vehicles, creating 11,000 jobs across the country,” General Motors followed up by saying “GM is making the largest investment in its history,” meaning $7 billion to build electric vehicles, which will result in the creation of 4,000 jobs in Michigan. Musk responded to the snub with a tweet, stating that Tesla had generated more electric vehicle jobs and spent more money developing EVs than General Motors and Ford combined.
Even if Vice President Biden isn’t convinced that Tesla is the leader in electric vehicles, the car industry is. Ford CEO Jim Farley used the T-word during a news conference to discuss big changes he is doing at the company. During a question and answer session on how Ford dealers will react to the changes Ford is making, he stated that the company is “creating an abbreviated list of requirements for a new experience [that] will be better than Tesla.” This is a major sequence of events. Ford is establishing two independent business divisions within the company: one that will focus only on electric vehicles, and another that would oversee the company’s gasoline-powered vehicle operations. We’re going to win as a company because of this shift,” Farley continued. “This transition is about targeted capabilities, better goods, and a better experience,” Farley said.
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Regarding the dealerships, Farley hopes to create a car-buying and service experience that is comparable to that of Tesla. Ford is chasing Tesla in the electric vehicle market, and Ford is well aware of this. Another important reason for separating the Ford EV division from the rest of the company is talent acquisition. Tesla has an easier time recruiting top engineering and software expertise because of the company’s roots in the Silicon Valley. The head of advanced technologies at Ford, Doug Field, said, “We’re making a concerted effort to establish a separate culture in Model e.” Model e is the new moniker for Ford’s electric vehicle (EV) company. This is the type of culture that draws the most talented technical talent… If they show up to work in bunny slippers, that is fine with me, but at Ford, “we have to have the greatest personnel.”
Ford is likewise attempting to match Tesla’s profitability in the electric vehicle market. Eventually, it intends to turn a profit from its EV activities by 2026. A corporate-wide target of creating operational profit margins of 10 percent by that time has been established for the company. Ford’s adjusted operating profit margin in the fourth quarter of 2021 came in at approximately 5.4 percent, according to preliminary figures. Taking into account the impact of regulatory credits Tesla sells for producing more than its fair share of zero-emission vehicles, Tesla’s operational profit margin in the fourth quarter was around 13.2 percent. “This marks a bold new concept, one that we feel has the potential to benefit the company operationally by focusing on growth for electric vehicles while also optimising costs for the company’s traditional ICE business,” says Emmanuel Rosner of Deutsche Bank.
Musk may be distracted by the president’s unwillingness to acknowledge Tesla, but the Tesla CEO should not lose sight of what Ford is doing in the meanwhile. Ford is vying for a piece of Tesla’s EV market share, as well as the company’s EV leadership position. Tesla stock was up 1 percent as of 3:14 p.m. on Wednesday, while Ford stock was up 8.5 percent over the same period. Stocks in the S&P 500 and the Dow Jones Industrial Average were up approximately 1.9 and 1.7 percent, respectively.
