Key Points

Ford's weak vehicle sales wiped out the early excitement for its new promising energy business.
Ford is also issuing a massive recall that could drive costs higher amid lingering commodity headwinds.
All eyes are on July 28 to see how quickly Ford expects core truck production to rebound.

For a few weeks, Wall Street treated Ford Motor (NYSE: F) like a Silicon Valley darling. The legacy automaker launched Ford Energy, a new business pivoting into battery energy storage systems (BESS) for artificial intelligence (AI) data centers, utilities, and industrial hubs.

Ford shares surged over 40% in May following the launch, but June quickly brought a classic market reality check, sending the stock tumbling 20.3%, according to data provided by S&P Global Market Intelligence.

Here's why Ford cooled off so fast, and what it means for investors.

Image source: Getty Images.

Why Sales and Recalls Dragged Ford Stock in June

Ford has repurposed its existing EV battery manufacturing plant in Kentucky to build grid-scale battery storage, capitalizing on the AI infrastructure boom. Ford also signed a multi-year agreement with EDF power solutions to provide up to 20 gigawatt hours (GWh) of BESS, starting with 4 GWh annually from 2028.

It's a smart move. Ford has the capital, the expertise, factory space and scale, and even a licensing agreement with Chinese battery maker CATL that itself serves as a massive competitive advantage.

Yet, June reminded investors that Ford still makes money selling vehicles, and those numbers aren't looking good.

Right at the start of June, Ford reported a 13.6% drop in total vehicle sales for May, fueled by a big fall in electric vehicle (EV) sales. Mustang Mach-E sales cratered 44%, while the flagship all-electric F-150 Lightning pickup sales slumped 45%. Even hybrid sales dropped 15.7% at a time when rivals like Hyundai and Kia posted surging sales.

Just as investors were digesting the weak numbers, Ford closed out the month with yet another recall. This time, Ford said it was recalling over 740,000 vehicles - mostly 2018 to 2021 SUVs and truck models - due to a transmission defect that poses a rollaway risk. The massive recall spooked investors as it reminded them of Ford's multi-billion-dollar legacy warranty costs.

This One Update Could Be the Key Catalyst for Ford Stock

Ford's energy business has solid potential and could easily become a big growth engine, but it won't save the stock if car sales and profits continue to dwindle. Fortunately for investors, there is some good news on that front.

In June, Novelis - a critical aluminum supplier to Ford - restarted production at its Oswego, New York facility, which had been shut down for months following two major fires. Production and sales of Ford's F-series trucks, which use aluminum bodies, took a big beating from the supply crunch. The disruption forced Ford to secure alternative aluminum supply channels that could cost the company up to $2 billion.

While supply won't normalize immediately as the Oswego plant still needs time to safely ramp back to full throughput, the restart should remove a massive production bottleneck and allow Ford to make up for some of the lost volumes and earnings in the coming months.

How quickly Ford can get its truck production back on track is the most important thing to watch for when it releases its second-quarter earnings on July 28 after the market close. That could largely determine where Ford stock heads next, as everything else is mostly noise for now.