- The tangible benefits of aluminum will increase the use of this metal in the production of vehicles over the next few years.
- According to Ducker Worldwide, about 18% of vehicles will have aluminum in the bodies by 2025, compared to the current figures of only 1%.
- Expansion of production facility by Novelis, developer and supplier of aluminum alloys to Ford, shows that the demand for aluminum alloys for automobiles will increase.
- The launch of Mustang outside North America will also result in considerable growth for the company as it is one of the most popular brands in the world.
F-150 is an extremely important product for Ford (NYSE:F) as it accounts for a substantial portion of its revenues. The company's decision to launch new F-150 with aluminum base will give Ford a first mover advantage; however, at the same time, this is also a risk for the company as it might result in considerable costs if the experiment fails. In our previous articles about the stock, we have discussed its prospects in different regions - China and Asia Pacific remain the main growth drivers for the company in the future. We have also briefly discussed some features of the upcoming truck in our previous article. In this article, we will focus in detail on the new F-150 as we are getting closer to its release. Further we will discuss the company's performance in different sectors and focus on its future prospects.
Why new F-150 might be a Win
The use of Aluminum will allow F-150 to be 700 pounds lighter in weight, according to estimates. The lighter models could be 732 pounds lighter than the existing ones but we can expect at least a 625 pounds decrease in weight across the board. The weights of the models mainly differ due to different sizes of engines. The heaviest truck from the series weighs 5,674 pounds and is equipped with a 5.0 liter V8 engine. On the other hand, the lightest model weighs 4,942 pounds and is equipped with a 2.7 liter turbocharged v6 engine, especially designed for the new series. This represents an advantage to the customers as they can pick and choose between economy and power.
By designing a lighter and economical truck, Ford has one goal in its mind: If the truck is economical, it will compete with Chrysler's Ram 1500. At the moment, Chrysler has the best fuel economy with 26 MPG highway and 29 MPG for its two models, Ram 1500 HFE and Ram 1500 EcoDiesel. If the weight reduction can result in improved mileage then the new F-150 will be a game changer for the company and it will result in considerable increase in the market share. Ford has lost some market share due to the delay for the upcoming model.
It has been quite some time that automakers are using aluminum to make some parts of their vehicles such as, hood and fender. However, this is the first time that a major part of trucks is being made with aluminum on a large scale in order to gain more strength and reduce weight. Many research companies believe that due to this will result in a shift in the sector and the use of aluminum is going to be the next big thing.
According to Ducker Worldwide, 18% of vehicles will be based on all-aluminum body by 2025 as compared to the current figures of 1%. More importantly, it expects 70% of the pickup trucks to have aluminum based bodies by 2025. Novelis, developer and supplier of military grade aluminum alloy to Ford, confirmed that it is working on their next batch of aluminum vehicles to finish in 2019. Novelis has also quadrupled its production capacity and hired 1,000 additional workers at Oswego plant with an investment of $500 million. The expansion of the production facility and the substantial investment by Novelis indicates that the demand for aluminum based bodies is expected to grow over the next few years.
Much bigger market for Mustang
Ford is taking steps to increase the global footprint of its iconic vehicle, Mustang. The model is immensely popular; however, it is mainly limited to the North American market. Until now, the company has not benefited from the massive potential for Mustang in Asia and other regions. However, Ford is now making efforts to exploit the growth potential of Mustang in the international markets. Mustang has been the only model in production since 1964 and Ford has sold over 9.2 units since the vehicle was launched in 1964. However, only 0.16 million of these vehicles were sold outside North America. Ford is taking a big step towards growth by developing its right-handed version to introduce in 25 new markets - these markets include Australia, United Kingdom and South Africa - Most of these markets are either developed or developing at a rapid pace, which means most of the customers can afford this model.
Due to an important transition in Ford's portfolio discussed in this article, this year might prove to be a game changer for Ford. We are optimistic about new Ford F-150 and we believe that the sales will be enhanced substantially over the next few quarters. Furthermore, the introduction of the new Mustang in the new markets will allow the company to achieve further growth. The growth prospects for vehicles with aluminum based bodies are bright as there are tangible benefits. We are expecting new F-150 to do well and drive the future growth in revenues for the company - in the short term, we will see a major increase in revenues as the company launches its new model. However, in the medium-long term, the growth rate will be lower. Nonetheless, revenue growth for Ford will remain strong.
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