Forget Tesla, ‘Pro’ unit is auto industry’s future

DETROIT – Ford Motor CEO Jim Farley on Thursday urged Wall Street to forget about Tesla and its FSD driver-assistance systems as the future of the auto industry, arguing investors should instead focus on the Detroit automaker’s “Pro” fleet business.

Farley compared the unit, which roughly doubled pre-tax earnings last year to $7.2 billion, to where Deere & Co. was seven years ago. The farm equipment maker’s stock has increased by about 235% since then.

“If you’re looking for the future of the automotive industry, stop looking at FSD and Tesla. Look at Ford Pro. It’s got half a million subscribers with 50% gross margin,” Farley said during a Wolfe Research conference.

Ford Pro is made up of the automaker’s traditional fleet and commercial businesses as well as emerging telematics, logistics and other connective operations for business customers – ranging from local plumbers and electricians to massive corporations. It also includes parts and services for businesses.

Ford expects the Pro unit’s pre-tax earnings to increase to between $8 billion and $9 billion this year, the automaker said earlier this month. That compares to earnings expectations for the company’s “Blue” traditional business of about $7 billion to $7.5 billion and projected losses in its Model e EV business of $5 billion to $5.5 billion.

Tesla does not break out revenue or earnings from its premium driver-assistance software, marketed as its Full Self Driving Beta, FSD or FSD Beta. Many Wall Street analysts have speculated that such software could bring in tens of billions of dollars per year by 2030.

Ford has said it expects revenue from telematics and other non-traditional subscription services to increase to $2,000 per vehicle annually, or about $167 a month, for Ford Pro in the years ahead. Farley reiterated Thursday that 20% of Pro’s overall revenue is expected to come from such services by 2026.

Farley reiterated that Ford Pro is undervalued within the automaker. Some on Wall Street agree.

Morgan Stanley’s Adam Jonas last week called Ford Pro the company’s “Ferrari,” referring to the extremely profitable luxury sportscar manufacturer that was significantly undervalued prior to being spun out of Fiat Chrysler in 2016.

“I remember a time when Fiat owned Ferrari, and I had a valuation of about $4 billion on it. Now Ferrari is worth $80 billion today, and the business was totally ignored by investors when it was part of Fiat,” Jonas said during Ford’s quarterly earnings call earlier this month. “Now Ford has a Ferrari, it’s called Ford Pro. And I think we agree, people are ignoring the cash cow.”

Jonas, a longtime Tesla bull, argued the business is being overlooked because profits from the business are being siphoned to fund Ford’s “EV science project.”

Farley said Thursday that while EV demand is slower than expected for consumers, fleet customers are actually adopting all-electric vehicles faster than the company had anticipated.

The Pro operations are a major part of Farley’s “Ford+” restructuring and growth plan. The unit is led by Ted Cannis, who is considered a successful utility man within the company.

“We always had a super successful pro-business … but there was no focus on it,” Farley said. “I think people are just starting to see [it].”