2 Reasons It's Time for Savvy Investors to Buy Ford Now

Long-term investors are sometimes wary of investing in the automotive industry, known for razor-thin margins, capital-intensive operations, and a cyclical industry that can be crippled during economic downturns.

However, Ford Motor Company (NYSE: F) has a lucrative dividend, often dishing out supplemental dividends when cash flow is strong, is growing a high-margin business with Ford Pro, and is slowly but surely turning around vehicle quality to lower warranty costs that can ding the bottom line.

For investors, the past decade has been forgettable, or worse, with Ford stock up only 12% -- but here are two reasons the next 10 years should be much more rewarding.

Follow the leader

For some investors, Ford may be the artificial intelligence (AI) play they didn't see coming. For others, the Detroit automaker is simply following Tesla, which has already introduced energy storage systems for data centers, utilities, and other large industrial customers.

The premise is simple: The same lithium-ion batteries that power electric vehicles (EVs) can also be used to store energy. While Ford Energy isn't a novel idea, investors were quick to support the venture, pushing the stock 13% higher after the announcement in a single session, the automaker's largest one-day gain since March 2020.

Morgan Stanley was quick to give the development a thumbs up and noted that Ford's target of roughly 20 gigawatt hours of annual production capacity, and initial deliveries slated for 2027, could generate between $500 million and $600 million in run-rate earnings before interest and taxes (EBIT). Morgan Stanley analyst Andrew Percoco even slapped on a potential valuation of $10 billion for Ford Energy. To be fair, it's likely already priced in as Ford's market capitalization in late April, before the Ford Energy announcement, hovered around $50 billion and has since surged to right around $60 billion.

Again, Ford Energy isn't a novel idea in the automotive industry. However, Ford is one of a small group that can offer energy storage systems that are compliant under Foreign Entity of Concern (FEOC) rules, enabling the automaker's systems to qualify for the 30% Investment Tax Credit for energy storage projects.

Ford Energy represents a way for the automaker to generate a new revenue stream, support higher margins, offset some development costs with tax credits, and unlock a higher valuation for its stock that has largely been stuck in neutral for a decade.

Speaking of higher margins

Decades ago, commercial sales for Detroit automakers were often frowned upon because they typically meant large volumes of lower-margin fleet sales to rental companies, intended to fill production capacity. Today, however, commercial sales have become a hidden gem of Ford's financial results.

Image source: Ford Motor Company.

Consider that Ford Blue, Ford's traditional retail business, generated $3.02 billion EBIT for the full year 2025 at a 3% EBIT margin. Ford Pro far outshined that result by posting $6.8 billion EBIT at a 10.3% EBIT margin. Part of the reason is that Ford Pro sells a lot of full-size trucks into commercial fleets, and another reason is the boom in Ford Pro subscription services. In fact, Ford Pro subscriptions grew by 30% in 2025, compared to the prior year. At the end of the first quarter, Ford Pro's paid software subscriptions reached 879,000 and continue to grow -- this is a high-margin business.

Further, Ford Pro and its commercial volume are a critical component of Ford's operations in Europe, as the company dominates commercial van sales in the region, which helps keep factories churning at solid utilization levels despite waning passenger car sales. Ford has a strategy for Europe that includes new models, including a new member of the Bronco family, but Ford Pro commercial vans will remain key to its bottom line overseas.

What it all means

Ford is slowly evolving before investors' eyes. The global automaker is pushing the boundaries of its business to include more high-margin sales of software and now energy storage. Ford has worked diligently to make sure its Ford Pro commercial vans help its customers' fleets generate more revenue and have less downtime, reinforcing Ford as a crucial partner to their business and solidifying future sales loyalty.

While Ford Energy and Ford Pro aren't household names, savvy investors recognize the potential of these higher-margin businesses to transform how Ford's stock is valued, and that looks like an opportunity.

Daniel Miller has positions in Ford Motor Company. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.