On Wednesday, shares of Ford Motor jumped 13%, a stock movement that was its best daily performance in nearly half a decade. This jump came as the company announced that it was venturing into energy storage as a way to utilize the factory space that had previously been allocated to making EV batteries.
Company shares closed the day trading at $13.5, putting the automaker among the best performers of the day on the S&P 500.
Investors in the company have been on the lookout for what the firm plans to do to regain its growth trajectory after writing down its EV plans and piling up losses in its existing operations. Its pivot to making energy storage systems intended for use by large industrial customers, data centers and utilities provided the growth potential the company needed.
The energy storage undertaking will be handled by Ford Energy, a subsidiary of Ford Motor. The firm is looking to tap into the booming market in the AI data center segment and the drive to upgrade energy grids to meet the demand for additional energy due to AI growth.
Under the energy storage plan, about $2 billion will be invested to start production, and the first systems are expected to roll off the production line in the second half of 2027. The target is to produce storage systems equivalent to a minimum of 20 gigawatt hours every year. The major task is likely to be in securing sufficient client orders to meet that lofty goal.
Over the coming months, Ford Energy is expected to sign supply agreements with AI hyperscalers who need utility-scale battery storage for their data centers and cloud computing facilities.
The potential value of this battery storage division could reach $10 billion each year if the company is successful in securing client orders and is also able to scale up its production in order to meet the delivery timelines agreed upon in each deal it bags. Continuity of client orders will be critical to the success of this new venture of Ford.
The battery storage pivot positions Ford to tap a high-margin line of business at a time when AI is growing rapidly and there are concerns about how to ensure round-the-clock power availability at data centers and other related infrastructure.
Ford is entering a space where existing players like Tesla Inc. (NASDAQ: TSLA) have a firm footing, and the newcomer will have to jostle for market share for the Ford Energy DC Block and other product lines that Ford Energy will roll out over the coming years intended for the U.S. and international markets.
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