Ford has recently adjusted its electric vehicle (EV) production strategy, leading to a significant reduction in its need for rare earth elements, particularly lithium. The automaker has scaled back its purchasing plans, a decision that has adversely affected Liontown Resources Ltd., its primary lithium supplier. Consequently, Ford’s stock saw a nearly 2% decline in Thursday afternoon trading.
Liontown disclosed that Ford has ceased orders for lithium scheduled for delivery in 2027 and 2028, while also significantly reducing its current order. The new agreement calls for Ford to take 256,250 tons of lithium, which is half of the amount initially ordered. This shift reflects a broader trend in the EV market; previously spurred by tax incentives, demand for lithium has waned amid a cooling market environment.
The lithium sector is experiencing an oversupply, with raw material availability increasing while market demand diminishes. Ford has cautioned that the EV market could contract by as much as 50% from current levels. Liontown is now searching for new customers to mitigate the impact of Ford’s reduced orders, a challenge that may prove difficult under the prevailing market conditions.
In another development, Ford appears to be positioning itself as a potential partner for Nissan. Reports suggest that Ford could play a key role in producing Nissan’s upcoming electric SUV. Nissan is exploring collaborations not only with Ford but also with Stellantis, another major automotive competitor. The new crossover SUV, based on the Nissan Rogue and utilizing the e-POWER hybrid system, aims to enhance fuel efficiency by 15% on highways—a notable advancement, especially in today’s fluctuating fuel market.
Regarding Ford’s stock performance, analysts currently hold a consensus rating of “Hold” for the stock, based on two Buy ratings, nine Holds, and two Sell designations over the past three months. The stock has experienced a rally of nearly 10% over the past year, but analysts project a modest average price target of $11.31 per share, indicating a potential downside risk of around 1.69%.
