Ford's Rare-Earth Supply Boost a Minor Relief Amid Deeper EV and Tariff Woes

What happened

Ford announced that its Chinese rare-earth magnet suppliers have received new export licenses from Beijing, aimed at boosting shipments and reducing shortages for vital EV components. This development addresses a specific supply-chain vulnerability highlighted in the DeepValue report, which notes ongoing disruptions like the Novelis fire as operational risks. However, Ford's Model e segment remains deeply loss-making, with a $5.1 billion EBIT loss in 2024, driven by intense EV competition and pricing pressure. While easing rare-earth shortages could support production stability, it does not mitigate the guided ~$1 billion tariff headwind or the sharp step-down in 2025 adjusted EBIT and FCF targets. Overall, this news offers modest operational relief but fails to alter the broader challenges of EV profitability, high leverage, and execution risks that underpin the cautious investment stance.

Implication

The new rare-earth licenses may help Ford secure critical magnets for EVs, reducing a potential bottleneck and supporting production amid broader supply-chain pressures. However, this does little to narrow the multi-billion-dollar annual losses in the Model e segment or offset tariff impacts that are already depressing earnings. Ford's high leverage and heavy ongoing capex continue to constrain free cash flow, limiting the margin of safety despite strong franchises in Ford Blue and Ford Pro. Investors should focus on the trajectory of EV losses and delivery against reduced 2025 guidance, as these factors are more significant for stock performance. Thus, while supply-chain enhancements are welcome, they are insufficient to justify a more constructive rating without evidence of sustainable profit improvement in electrification.

Thesis delta

This news slightly reduces one operational risk by potentially alleviating rare-earth magnet shortages for Ford's EV components, which could aid production consistency. However, it does not shift the fundamental investment thesis, which remains centered on deep EV losses, tariff headwinds, and high financial leverage that constrain earnings and cash flow. The WAIT rating is unchanged, as the modest upside from current valuations still depends on execution against larger profitability and balance sheet challenges.