Morgan Stanley reiterated an Overweight rating on Ford Motor (NYSE:F) with a 12-month price target of $16.00 after documents released by China market regulators revealed that the automaker plans to setup a new-energy passenger car joint venture (JV) with state-owned Chongqing Changan Automobile (SZ:000625).
According to this new JV, Changan Ford Motor will hold a 60% ownership share, while Chongqing Changan Automobile will possess a 40% stake. This arrangement would grant Changan a total economic interest of 70%. Although additional specifics about the agreement will be disclosed in due course, the JV's primary focus is expected to involve manufacturing and distributing new energy passenger vehicles under mainstream brands, along with distributing Ford brand models.
“The announcement corroborates Ford management messaging around leaning into the strength of Chinese auto players in China.” Morgan Stanley analysts wrote in a note.
Ford's sales in China have experienced an 80% decline since 2016, resulting in a market share of less than 1% in the country as of year-to-date 2023. The analysts raised doubts about the company's capacity to bring about substantial transformation in the geographical market, even through a joint venture.
Morgan Stanley's "Overweight" relies on a substantial shift in the electric vehicle strategy, necessitating increased cooperation with competitors.
“We look forward to exploring areas where Ford can execute a relevant electric vehicle program while mitigating the significant cash drain on the enterprise.” the analysts added.
Shares of F are down 0.86% in premarket trading Tuesday morning.