One of the good things, legacy automaker Ford (F) recently discovered, about cutting back on your electric vehicle (EV) production is that you no longer need near the amount of rare earth elements you once did. Ford has pared back its plans to both purchase and receive lithium in the near term, and this comes as a blow to Liontown Resources Ltd., who was serving as Ford’s lithium supplier. The move hit shareholders oddly hard, and Ford shares dropped nearly 2% in Thursday afternoon’s trading.
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Liontown revealed that Ford not only shut down any orders of lithium in 2027 and 2028, but it also pared back the quantity to be delivered. Now, Ford is taking 256,250 tons, which is half of what it originally ordered, the report noted. Back when there were tax credits for EV purchases, EV makers were in a scramble to buy lithium. But with the credits gone, and the market much less able to produce organic demand, the need for lithium has fallen accordingly.
Worse yet, reports note, the lithium market is experiencing a glut of raw material as it is. So there is a rapidly increasing supply, and a steadily declining demand. Not so long ago, Ford revealed that the market for EV may be cut to as much as half of its current levels. Liontown is already looking for new customers—which it would all but have to—but finding them might be a taller order than expected under the new market conditions.
Ford Making Nissans?
So we also know that Nissan (NSANY) has been experiencing its own problems in the market. But it turns out that Ford may be a surprisingly helpful partner for Nissan, as it may be the company that produces Nissan’s next electric SUV.
Interestingly, Nissan is not just talking to Ford about the deal, but is also talking to Stellantis (STLA), one of Ford’s biggest rivals. Nissan wants to make a crossover SUV, reports note, and will be basing it on the Nissan Rogue. It would run on the e-POWER hybrid system, which means it will use a gas engine to charge its battery, but it is still at least somewhat electric. The new system will offer 15% better fuel economy on highways, which is a welcome development regardless of gas prices.
Is Ford Stock a Good Buy Right Now?
Turning to Wall Street, analysts have a Hold consensus rating on F stock based on two Buys, nine Holds and two Sells assigned in the past three months, as indicated by the graphic below. After a 9.93% rally in its share price over the past year, the average F price target of $11.31 per share implies 1.69% downside risk.
