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Shares in Detroit carmaker Ford surged more than a fifth over two days, the sharpest jump since 2020, on investor hopes that its new energy unit will profit from the US data centre boom.
Ford launched its new subsidiary, Ford Energy, on Monday as part of a pivot away from electric vehicles and towards providing battery storage capacity for Big Tech giants building AI data centres, deploying technology licensed from Chinese battery giant CATL.
The company’s stock jumped 13 per cent on Wednesday after Morgan Stanley analysts said its relationship with CATL gave Ford an “under-appreciated strategic competitive advantage for its energy storage business”, estimating it could generate a gross margin of 25 per cent and grow to be worth $10bn.
Ford chief executive Jim Farley told shareholders at a virtual annual meeting on Thursday that the Dearborn, Michigan-based company had received “tremendous interest from customers and we’re actually in the contracting phase for our early capacity as we speak with several customers”.
Shares in Ford shares closed 6.7 per cent higher on Thursday, resulting in a $9.9bn increase in market capitalisation over the past two sessions.
The business unit was formed following the dissolution of its “Blue Oval” joint venture with Korean battery company SK On, which had produced high-nickel batteries for Ford’s first generation of EVs.
But Ford’s EV push foundered, resulting in a $19.5bn writedown in December. The company at the time said it would repurpose a Kentucky battery plant previously operated by Blue Oval to produce lithium iron phosphate (LFP) energy-storage batteries using CATL technology instead.
Farley described the new subsidiary earlier this year as a “start-up with a short payback period that uses our manufacturing muscle and cost advantage”.
He also said it would complement the “Ford Pro” fleet business for commercial customers.
“When we come calling to large grid suppliers, energy companies, they’re really excited about Ford being in this business,” he said. “We’re a trusted company. They’ve been buying our vehicles for a long time, and we’ve done our homework on this business.”
Some analysts have noted Ford’s expansion of its licensing agreement with CATL has been met with opposition from members of Congress, calling into question whether batteries produced under the agreement would qualify for crucial federal investment credits.
In a letter to Farley in January, John Moolenaar, chair of the House of Representatives’ China committee, demanded an explanation of the company’s burgeoning relationship with the world’s biggest battery maker.
“China poses a serious threat to our supply chain independence and economic security. As you know, our auto industry is not immune to this challenge,” Moolenaar wrote.
Ford expects its Model e EV business to record a loss this year of between $4bn and $4.5bn, having lost $11bn between 2023 and 2025.
The business’s core profitability has improved, however, as a result of shifting its focus from large all-electric vehicles in the North American market to smaller higher-volume EVs in Europe. It plans to launch its low-cost “Universal Electric Vehicle Platform” next year and expects its Model e division to break even in 2029.
Dan Levy, an analyst at Barclays, said Ford Energy could be a “key contributor to reaching break-even in Model e”.
But he cautioned the “opportunity should be balanced against questions of execution and ramp”, noting the planned capacity of Tesla, the dominant player in US energy storage, is seven times higher than Ford’s.
Levy added that while the stock surge “arguably wasn’t rational on the surface, with much still for Ford to prove, in the context of the market’s excitement over AI and data centres, the move makes sense”.
