Can Ford Challenge Tesla with Its EV Charging Network?

Yesterday, Ford (F) announced that it would offer North America’s largest electric vehicle public charging network, the FordPass Charging Network, to its EV (electric vehicle) customers. The charging infrastructure would include more than 12,000 places to charge, which includes fast charging and more than 35,000 charge plugs. Ford’s EV charging network would be the largest in North America.

EV consumers’ concerns: Electric range

One of the biggest concerns for consumers making a switch from ICE (internal combustion engine) vehicles to EVs is its range. This means the distance a vehicle can travel on a single charge.

Range anxiety is an EV driver’s fear that the battery will run out before reaching their destination. It is also one of the primary considerations for potential EV buyers. A strong supercharger network helps mitigate this fear for potential customers.

Ford to offer a strong electric charge network ahead of EV launch

An interesting thing to note here is that Ford doesn’t yet offer any electric vehicles. Its first Mustang-inspired electric SUV should arrive next year. According to Ford’s October 17 press release, this EV would come standard with a Ford mobile charger. For longer commutes, a Ford Connected Charge Station can power a vehicle overnight.

Ford is also collaborating with Amazon (AMZN) for all of its installation services. Notably, Ford and Amazon both have invested in Rivian, an electric-vehicle startup, to boost their EV ambitions. Amazon also placed a bulk order of 100,000 electric delivery vans from Rivian.

Ford’s complimentary access to its charging network

In its press release, Ford’s director of global electrification, Ted Cannis, said, “Among people who already own or want to purchase electric vehicles and plug-in hybrids, 48 percent say that a lack of charging stations is one of their main concerns.”

The company is working to address this concern before launching its EVs. Ford is also providing two years of complimentary access to the FordPass Charging Network. However, customers would still have to pay to charge their EVs through this service.

Ford plans to work with Electrify America, backed by Volkswagen (VLKAF), through which it would provide access to DC fast chargers. These chargers could charge the vehicles within minutes instead of hours.

Ford’s vehicle electrification effort

This effort is the latest push in Ford’s endeavor to electrify its fleet, in which it is investing $11.5 billion through 2022. Ford is working to catch up with the electrification trend, as some companies have already powered ahead of it in this segment—particularly Tesla (TSLA).

Tesla is eyeing the electric pickup market

After successfully launching several EV vehicles, Tesla is also eyeing the electric pickup truck segment. In the truck segment, Ford and US legacy automakers General Motors (GM) and Fiat Chrysler (FCAU) hold a dominant position. You can read F, GM, FCAU: Who’s Winning the US Truck Sales Race? for more on this topic.

Ford is also developing the electric version of its popular F-150 truck to maintain its supremacy in the trucking segment.

Ford’s charging network to give competition to Tesla

Ford’s charging infrastructure would not only ease the transition from ICE vehicles to EVs, but it is also expected to compete against Tesla. One of Tesla’s key competitive advantages has been its strong Supercharger network. Tesla, the pioneer in the EV space, has 1,636 supercharger stations with 14,497 superchargers.

Teslarati reported that its supercharger network was listed as its “competitive moat” by Morgan Stanley analyst Adam Jonas. A strong charging network offered by Ford could entice some of the current and potential EV buyers to switch to Ford EVs in the future.

Tesla’s range advantage

However, another major competitive advantage Tesla has over the so-called “Tesla killers” is its range. The Tesla Model S’s long-range mode offers a range of 370 miles. The Tesla Model 3’s standard range is 240 miles. Most of Tesla’s rivals have not been able to beat its range.

Business Insider spoke with Munro & Associates’ Mark Ellis, who referred to Tesla’s Model 3, noting, “It’s the best design of any battery pack I’ve seen so far.” He also attributes Tesla Model 3’s higher range to the motor, which he noted has a favorable weight-to-power ratio.

Ford versus Tesla

In our view, Ford has taken a step in the right direction to challenge its competition even before the release of a single EV. However, it needs to do much more than installing EV infrastructure to pose a serious threat to Tesla in the EV space. However, one thing seems clear to us—EV makers such as Tesla, Rivian, and other such players are ready to challenge ICE makers.

We highlighted in Is Tesla Giving ICE Makers a Run for Their Money? that Tesla’s Model 3 was Norway’s top-selling EV in September. Tesla’s total market share of 24.8% was higher than 10.3% for gasoline-powered cars and 12.4% for diesel cars.

Ford’s stock price and dividend yield

Ford’s stock price has appreciated by 19% year-to-date. However, its stock price has mostly been on a downtrend since it released its second-quarter earnings results on July 24. Due to the fall in its stock price, the company’s dividend yield has climbed to 6.9%. This yield is much higher than the S&P 500’s (SPY) yield of about 2.0%.

Given Ford’s expensive restructuring plan, there are increasing concerns that it will be able to sustain its dividend. You can read Should Ford Investors Brace for a Dividend Cut? for more on this topic.