Ford’s electric vehicle (EV) division, Model e, experienced significant financial setbacks in the first quarter of 2023, recording a staggering loss of $1.3 billion.
This equates to an alarming $132,000 loss for each of the 10,000 vehicles sold during this period, marking a notable decline in performance from the previous year, where sales were 20% higher. The loss was primarily due to a whopping 84% drop in revenue, amounting to roughly $100 million, which Ford largely credits to widespread price reductions across the EV industry.
Ford CFO John Lawler highlighted the challenges faced by the company due to ongoing price wars among EV manufacturers, noting that while Ford has managed to reduce costs by approximately $5,000 per Mustang Mach-E, revenues are declining at a faster pace. The company’s extensive financial commitments to research and development for future EVs also contribute heavily to the losses, with anticipated EBIT losses projected to reach $5 billion for the year.
Despite these challenges, Ford is optimistic about its future in the EV market. CEO Jim Farley indicated that forthcoming changes and the next generation of Ford EVs could potentially lead to profitability in the near future. This sentiment is supported by strong demand within Ford’s Pro unit, which caters to fleet sales and reported substantial orders, including 9,250 E-Transit vans for the US Postal Service and over 1,000 F-150 Lightning pickups and Mustang Mach-E SUVs from Ecolab.
Contrasting Ford’s struggles, General Motors has announced that it expects its North American EV business to become profitable in the second half of this year, while Stellantis reported profitability in its European EV operations last year. Meanwhile, Tesla, the global leader in EVs, also faced difficulties with a 48% drop in adjusted earnings in the first quarter.
Ford’s broader business spectrum, including its Ford Pro and Ford Blue units, managed to maintain roughly the same profit levels as the previous year, despite the downturn in the Model e division. Ford Pro, in particular, was a bright spot, doubling its EBIT from the previous year to $3 billion as revenue surged 36% to $18 billion. However, Ford Blue witnessed an 11% decline in vehicle sales and a 13% drop in revenue, culminating in a substantial decrease in EBIT.
Look at those charts shared by Ford. The plunge from Q4 to Q1 is quite sharp and seeing a $1.3 billion loss is tough to swallow.
