Will Ford's Renault Alliance Help Counter Rising Chinese EV Rivals?

Ford Motor Company F is teaming up with Renault SA RNLSY to develop small, low-cost electric vehicles for Europe and co-produce commercial vans, per a Reuters article published on MSN. 

Per CEO Jim Farley, the company is struggling to maintain its position amid intensifying competition from Chinese EV makers, particularly in Europe. Under the new partnership, the first of two compact EVs built by Renault at its northern France plant will arrive in European showrooms in 2028. Per Farley, these models will be smaller than anything Ford plans for the United States and will fill a key gap in its European lineup. 

The two companies will also collaborate on Ford and Renault brand vans for the region, which is likely to create a European LCV powerhouse that Chinese rivals will struggle to challenge. The collaboration began after Renault executives visited Ford’s Detroit headquarters in March. 

Ford’s share of the European passenger car market has dropped from 6.1% in 2019 to 3.3% this year as it scaled back passenger car operations, cut jobs and closed its Saarlouis plant in Germany. Leveraging Renault’s EV platforms while incorporating Ford’s design approach is expected to strengthen Ford’s competitiveness against both legacy European automakers like Volkswagen and rapidly expanding Chinese brands. F carries a Zacks Rank #3 (Hold) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Other Auto Makers Facing Competition From Chinese Counterparts

Tesla, Inc. TSLA has been losing market share after dominating the EV market for years, while all other players are gaining market share at its expense. Tesla’s US EV market share is currently below 50%, down from 63% in 2022. The company’s dominant market position is likely to drop further, thanks to stiff competition. There are also concerns with respect to the Chinese market, which is full of home-grown players. As China is a big market for Tesla, stiff competition is likely to erode its share in the country.

Rivian’s RIVN trucks are on the higher end of the market, making demand sensitive to economic conditions. Amid the rising competition from domestic and Chinese players, Rivian must differentiate itself while maintaining growth. Rivian’s next model offering is still a year away.

F’s Price Performance, Valuation and Estimates  

Ford has outperformed the Zacks Automotive-Domestic industry year to date. Its shares have gained 32.1% compared with the industry’s growth of 12.7%. 

 
From a valuation perspective, F appears undervalued. Going by its price/sales ratio, the company is trading at a forward sales multiple of 0.32, lower than the industry’s 3.25. 

 
The Zacks Consensus Estimate for F’s 2025 EPS has moved down 2 cents in the past seven days. The Zacks Consensus Estimate for F’s 2026 EPS has inched up a penny in the past 30 days. 

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This article originally published on Zacks Investment Research (zacks.com).

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