In the last ten years, practically nothing has been brought in (even taking into account dividend payments), Ford Motor Company (F 0.48%) was a pretty pathetic long-term investment. For context: S&P500 achieved a return of 241% over the same period, while the emerging Tesla grew by 1,100%.

TSLA Total Return data by YCharts

While past performance is not a predictor of the future, it can provide some clues. Let’s examine what the next decade might bring have in Store for Ford, which wants to consolidate and improve its business.

The EV boom became the EV bust

Like many established car manufacturers, Ford was swept away in the much-vaunted transition to Electric vehicles (electric vehicles), which promised to transform the cumbersome business of internal combustion engines into something more exciting and innovative. But While the company is quick to adopt the new technology, it is not a great boon to the bottom line.

Image source: Getty Images.

In the second quarter, Ford’s new electric vehicle segment, the Model E, lost $1.1 billion – a staggering $46,000 per vehicle sold. That brings the segment’s total losses this year to $2.5 billion, partly due to a price war in the industry as companies grapple with increasing competition and weak demand.

There are several reasons for the market weakness. First, high interest rates make cars less affordable, as these expensive purchases are typically with the help of loans. The expected interest rate cuts by the Federal Reserve could improve the situation. But Analysts at JP Morgan estimate that there is a 35% chance that the US economy will slip into recession by the end of the year, which would also have a negative impact on auto demand.

What do the next 10 years hold?

Over the long term, demand for electric vehicles is expected to rebound and slowly replace demand for traditional combustion engine vehicles as battery technology improves and infrastructure such as charging stations are built. However, it is still unclear what this trend will mean for Ford and other industry participants.

Recent years indicate that the production of electric vehicles is becoming less and less profitable. The new technology is also shifting the focus of the automotive industry to China, where manufacturers such as BYD can produce electric vehicles at shockingly low prices due to their vertical integration. BYD’s cheapest car, the Seagull, is sold for the equivalent of 9,700 USD in China.

While Washington’s 100 percent tariff on Chinese electric vehicles may keep extremely competitive products like the Seagull out of the U.S. market, Ford could face margin-destroying price competition elsewhere. in the world.

Is Ford stock a long-term buy?

If there is a bright spot for Ford stock investors, it may be the company’s liquidity situation. Despite the ongoing weakness in the EV business, Ford generated around $2.5 billion in the fourth quarter Operating resultwhich isn’t too bad. And the company has a whopping $25 billion in cash and equivalents on its balance sheet.

Ford not only has enough money to meet all of the industry’s short-term challenges, but There is also enough left to pay out to investors. The company is known for the implementation of special dividends as part of his plan 40 to 50% of free cash flow for investors. And the stock has a dividend yield of around 5.8% at the time of writing.

However, dividends do not automatically make a stock a good investment – ​​especially if the share price stagnates or falls. S&P500 returns averaging 10% per year over long periods of time and it is unlikely that Ford will exceed that number in the next decade, even with its massive payout. The company faces too many serious long-term Challenges to be considered as a purchase.