Ford (F) Deepens Ties With China, Plans to Import Lincoln SUVs

Ford F is set to import its restyled Lincoln Nautilus sport-utility vehicles from China to the United States, marking a significant shift in its manufacturing strategy. This move comes as other U.S. companies are distancing themselves from China. The sleeker, hybrid-powered SUV will be the first model Ford imports from its Hangzhou plant, a joint venture with China’s Changan Automobile, which already manufactures the Nautilus for the Chinese market.

The 2024 midsize Lincoln Nautilus SUV, which features a 48-inch dashboard display and an internal combustion engine, is set to hit the U.S. market in the first quarter of 2024, with a starting price of $51,810. Lincoln plans to electrify its entire fleet by 2030, with four electric vehicles currently in development.

Currently, the Nautilus is being produced for the U.S. market at Ford’s Oakville Assembly Plant in Ontario, Canada. However, the automaker recently announced a CAD 1.8 billion (approximately $1.3 billion) investment to transform the facility into an electric vehicle hub, prompting the shift in production to China.

Though importing vehicles from China is not without precedent, it has often drawn public and political criticism, particularly during periods of heightened tension between the two countries. For instance, General Motors GM has faced backlash for importing its Buick Envision crossover from China since 2016.

GM has sold over 200,000 vehicles produced in China, a move that has been labeled as an “Invasion” and “a slap in the face” by American union representatives.

Despite potential criticism, importing the Nautilus from China could make good business sense for Ford. According to a Lincoln spokesperson, centralizing Nautilus production in China for both markets enables the company to achieve manufacturing efficiencies while retooling the Oakville facility for next-generation electric vehicles.

This announcement comes on the heels of a Ford report highlighting the company’s position as the top automaker in terms of vehicles assembled and hourly autoworkers employed in America, as well as vehicles exported from the U.S. to other countries.

The 2024 Nautilus will feature a redesigned exterior, new interior with door-to-door screens, and a unique feature called “Lincoln Rejuvenate,” which offers a multisensory in-cabin experience with lighting and digital scenting. While the concept was introduced in China, the Nautilus will be the first U.S. production car to incorporate these features.

The Nautilus will be powered by a 2.0-liter turbocharged engine and a hybrid powertrain, with sale prices ranging from $51,810 to $75,860. The introduction of the redesigned Nautilus and “Lincoln Rejuvenate” comes as the once-prominent luxury brand seeks to revitalize its image, following a 4% drop in Lincoln vehicle sales in the U.S. last year to just under 83,500 units, compared to a peak of over 112,200 in 2019.

In conclusion, Ford’s decision to import the Lincoln Nautilus SUV from China represents a strategic move that may offer manufacturing efficiencies and support its transition to electric vehicle production. However, the company may face public and political criticism for deepening its ties with China, particularly given the current geopolitical climate. Investors should watch Ford’s performance in the luxury segment and the overall market response to this decision as the automaker works to rejuvenate the Lincoln brand.

Zacks Rank & Key Picks

Ford currently carries a Zacks Rank #3 (Hold). The Zacks Consensus Estimate for F’s 2023 bottom line has moved south by a penny over the past seven days. The estimate for 2023 earnings implies a year-over-year decline of 20.2%

A few better-ranked players in the auto space are BYD Company Limited BYDDY and Ferrari N.V. RACE, each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

BYD is engaged in the research, development, manufacture and distribution of automobiles, secondary rechargeable batteries, and mobile phone components. The Zacks Consensus Estimate for BYDDY’s 2023 and 2024 sales implies year-over-year growth of 175% and 26.2%, respectively.

Ferrari is engaged in designing, manufacturing and selling sports cars. The Zacks Consensus Estimate for RACE’s 2023 sales and earnings implies year-over-year growth of 14% and 19.8%, respectively.

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