Achi news desk-
Ford’s electric vehicle unit reported losses rose to US$1.3 billion in the first quarter, or US$132,000 for each of the 10,000 vehicles it sold in the first three months of the year, helping to reduce the company’s earnings overall .
Ford, like most car manufacturers, has announced plans to move from traditional gas vehicles to electric vehicles in the coming years. But it is the only traditional carmaker to break out the results of its retail electric vehicle sales. And the results it reported Wednesday show another sign of the profit pressure on the electric vehicle business at Ford and other automakers.
The EV unit, which Ford calls the Model e, sold 10,000 vehicles in the quarter, down 20 percent from the number it sold a year earlier. And its revenue plunged 84 percent to about US$100 million, which Ford attributed largely to price cuts for electric vehicles across the industry. That resulted in a US$1.3 billion loss before interest and taxes (EBIT), and the massive loss per vehicle in the Model e unit.
The losses go well beyond the cost of building and selling those 10,000 cars, according to Ford. Instead, the losses include spending hundreds of millions on research and development of the next generation of electric vehicles for Ford. Those investments are years away from paying off.
And that means this isn’t the end of losses at the unit – Ford said it expects Model e to have EBIT losses of US$5 billion for the full year.
The company said its “intention” is to get EV prices to cover the actual costs of building each EV, rather than covering all research and development costs, within the next 12 months. But a price war among EVs for about a year and a half has made even that measure of profitability very difficult said Ford CFO John Lawler. He said that while Ford has eliminated about US$5,000 in cost on each Mustang Mach-E, “revenues are dropping faster than we can take out the cost.”
In 2023, Ford Model e reported a full-year EBIT loss of US$4.7 billion on sales of 116,000 electric vehicles, or an average of US$40,525 per vehicle, just over a third of the first quarter’s loss.
The Model e does not account for all of the company’s electric vehicle sales. Some are also sold in its Ford Pro unit, which handles fleet sales to business and government buyers. And Ford said it has strong demand for electric vehicle sales in that unit, including an order for 9,250 E-Transit vans from the US Postal Service, due for delivery through the end of this year, and an order for more than 1,000 from its lightning F-150 pickups and Mustang Mach-E SUVs from Ecolab, a global sustainability company.
Despite the EV losses, Ford CEO Jim Farley said in a call with investors that the company is making changes in its EV business, and that the company’s planned next generation of EVs will allow it to be profitable on the business that in the near future.
Ford Pro, which sells mainly traditional internal combustion vehicles, was Ford’s main profit driver in the quarter, posting EBIT of $3 billion, or more than double what it did a year ago, as revenue from the unit rose 36 percent to US. $18 billion. The number of Ford Pro vehicles sold was up 21 per cent to 409,000.
But Ford Blue, which sells gasoline-powered cars to consumers, said sales fell 11 percent to 626,000, and revenue fell 13 percent to US$21 billion. That resulted in EBIT in those traditional sales falling by nearly two-thirds to US$905 million.
Together, Ford Blue and Ford Pro produced roughly the same level of profit as a year earlier, but the mounting losses in the Model e unit meant that Ford’s overall net income fell by 20 percent to US$1.3 billion, while its adjusted earnings per share fell to 49 cents, down 21 per cent from a year earlier, but slightly better than analyst forecasts of 44 cents per share.
General Motors rival Ford reported earlier this week that it remains on track to have its North American EV business turn profitable in the second half of this year, while Stellantis, which makes cars and trucks in North America under the Jeep, Ram, Dodge and Chrysler brands, said that its European EV business was already profitable last year.
Tesla, the world’s largest EV maker, on Tuesday reported that its adjusted earnings plunged 48 percent in the first quarter as revenue fell 9 percent, after it reported the first year-over-year decline in sales since the pandemic.
