DHL buying Ford E-Transit cargo vans showcases the automaker's electric vehicle strategy

Published Mon, Dec 5 20223:31 PM EST

Kevin Stankiewicz @in/kevin-stankiewicz-b5593466 @kevin_stank

Delivery giant DHL and Club holding Ford Motor (F) struck an electric van and software deal that bolsters the automaker's multipronged EV strategy, an approach that's central to why we own the stock. The news DHL will acquire 2,000 Ford E-Transit cargo vans by the end of 2023, the companies announced Monday. The agreement also includes access to Ford Pro's fleet management software and charging programs. Ford Pro is the company's commercial vehicle division. DHL— owned by Germany's Deutsche Post — said it has already received some of the E-Transit vans, adding them its global fleet of roughly 27,000 electric vans. Ford and DHL indicated there's more collaboration between the companies on the horizon. Their agreement allows for potential "co-development of future products as well as new digital and charging solutions," according to a press release. Ford also will provide DHL with test versions of future vehicles and fleet management services. We think this a notable deal — not necessarily because of the total number of E-Transit vans DHL will add to its fleet over the next year, but because it aligns with Ford's broader electric vehicle approach. Confidence in Ford's EV plan over the long term undergirds the Club's investment thesis in the company. When Ford CEO Jim Farley told CNBC last year the automaker would not "cede the future to anyone" on EVs, he spoke of a strategy that emphasizes markets where it's already a leader in internal combustion engine vehicles. Commercial vehicles like the Transit van is one of those strong Ford markets, and deliveries of the all-electric version began in early 2022. Ford has sold roughly 5,800 E-Transit vans through November , and the vehicle has become the top-selling commercial vehicle in North America, according to the company. The E-Transit also been showing strength in Europe, Ford said in a release announcing the DHL deal. Since June, the E-Transit has been the best-selling product in its segment across Europe. The Club take Put this all together, and Monday's DHL-Ford news is a sign of further momentum for a key vehicle in the Blue Oval's burgeoning EV lineup. The fact the deal extends to Ford Pro's fleet management software and charging programs is worth highlighting, too. In addition to selling the EVs themselves, Ford Pro offers subscription services geared toward commercial clients that provide an additional revenue stream. One of those is called Telematics, the official name for the fleet management software DHL will use under Monday's deal. Another is known as Ford Pro Charging, which launched in Europe in April and includes a consulting component, as well as charging installations and software that helps with billing. Remember, investors generally are willing to pay a premium for the predictability associated with subscription revenue. Plus, software tends to have higher margins than hardware, which in the case of an automaker are the cars, trucks and vans. Because Ford's traditional business of building and selling vehicles is cyclical and has lower margins, connected software services are an attractive place to expand. Big picture, Ford shares have struggled this year — down about 35% year in 2022 — and they may continue to face pressure in the near term. But for newer Club members with a longer time horizon, we think t hey look attractive at just under 8 times forward earnings . (Jim Cramer's Charitable Trust is long F. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

The badge of a Ford Motor Co. E-Transit electric vehicle during a presentation in Washington, D.C., U.S., on Wednesday, July 28, 2021.

Al Drago | Bloomberg | Getty Images

Delivery giant DHL and Club holding Ford Motor (F) struck an electric van and software deal that bolsters the automaker's multipronged EV strategy, an approach that's central to why we own the stock.