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Summary
- Ford has announced its plans to almost double its investment in electric vehicles to US$ 22 billion up to 2025.
- A semiconductor crunch could cause its annual operating profits to drop by US $1-2.5 billion.
- Ford has also announced an alliance with Google's cloud computing platform and Android operating system to digitise its vehicles.
US-based automotive giant Ford (NYSE:F) has decided to nearly double its investment in electric vehicles (EVs) to US$ 22 billion through 2025 despite the challenges due to the shortage of semiconductors within the industry. It has noted that the shortage would negatively impact profits in 2021.
Ford’s move comes on the back of some latest developments -- recent growth in Elon Musk-owned Tesla (NASDAQ:TSLA), and the US government’s recent push towards emissions-free vehicles. Last week, auto major General Motors (NYSE:GM) said that it aims to have most of its fleet free of carbon emissions by 2035.
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Semiconductor shortage
The global auto industry is currently facing a chip supply crunch due to a rise in demand among the customers in 2020 due to the coronavirus pandemic.
Recently, Ford announced that it would reduce its F-150 pickup truck production due to the global shortage of semiconductor supply issue and highlighted that this could lead to a loss of 10 to 20 per cent in the Q1 production. Many other carmakers have announced similar cuts.
Auto major GM had announced that it was shutting production at three of its plants and will slash its output at another plant, while Toyota has announced that its San Antonio plant output will be impacted due to the supply side challenge.
Digitisation of driving
The No.2 US automaker has also announced its focus on digitisation with new alliances with technology partners, highlighting the importance of incorporating a digital experience for its vehicles.
On Monday, Ford CEO Jim Farley announced a new venture with Google to utilise its cloud computing platform and Android operating system in their vehicles in 2023 as part of their digitisation initiatives.
Furthermore, the company is planning to use the technology platform in its manufacturing, training of its artificial intelligence (AI) and machine learning systems, and employee training verticals.
The company added that it has plans to use e-commerce giant Amazon's (NASDAQ:AMZN) voice program and similar apps by Apple (NASDAQ:AAPL) and Microsoft (NASDAQ:MSFT) for its digitisation initiatives.
Financial results
Recently, Ford said its annual operating profits could drop by US$1-$2.5 billion due to lost auto sales due to the semiconductor shortage. The US automaker projected its operating profits could grow between US$ 8 billion and US$ 9 billion in 2021. However, it added that it could lose 10 to 20 per cent of its planned production output based on their suppliers’ estimates.
The company announced its Q4 results reporting a loss of US $2.8 billion compared to US $1.7 billion in 2019 on a year-on-year basis. The loss per-share basis was 42 cents and was mainly due to a pandemic-induced drop in auto sales. The automaker's revenues had also declined by 9.3 per cent to US $36 billion. Ford shares rose over 1.5 per cent closing at US$ 11.37 on Thursday.
