ARKANSAS, Oct 27 (Future Headlines)- Ford’s recently released third-quarter earnings have highlighted the automaker’s growing electric vehicle (EV) losses, mainly attributed to pricing pressures and slowing demand. Several key points emerge from Ford’s Q3 earnings report.
In the third quarter, Ford managed to sell 20,962 EVs, surpassing its rival, General Motors. This uptick in sales was partly due to increased production of the Mustang Mach-E, one of Ford’s prominent electric models.
Despite experiencing a 20% drop in Mach-E sales during the first half of the year, Ford attributed this decline to a revamp at its Mexican plant, where the model is manufactured. However, the third quarter saw a 42.5% increase in Mach-E sales, with 14,842 units sold. In September alone, the Mach-E set a new record with 5,872 models sold.
In contrast, sales of Ford’s electric pickup, the F-150 Lightning, fell by 46% in the third quarter. Ford indicated that production of the F-150 Lightning had resumed after a six-week shutdown to expand the Rouge Electric Vehicle Center. Despite this, Ford announced plans to cut one of three shifts at the facility, attributing it to “supply chain issues.”
Ford introduced substantial incentives on both the Mustang Mach-E and F-150 Lightning in an effort to stimulate demand. In the third quarter, Ford’s EV shipments increased by 44%, contributing to a 26% year-over-year growth in revenue for its Model e unit, totaling $1.8 billion.
Despite higher volumes and revenues, Ford reported an operating loss of $1.3 billion for its EV unit, up from $1.1 billion in the previous quarter. Operating margins fell to -75.6% in Q3 from -58.9% in Q2. Ford expects a full-year loss of $4.5 billion for its EV unit, translating to a loss of approximately $36,000 for every EV sold during the quarter. One of the key reasons for these losses is that buyers are hesitant to pay a premium for EVs over gas or hybrid vehicles, exerting downward pressure on prices and profitability.
Due to the challenges posed by EV pricing and profitability, Ford has decided to postpone around $12 billion in planned investments aimed at boosting EV manufacturing capacity. This move aligns with Ford’s efforts to maintain competitiveness with Tesla, which has been consistently reducing prices throughout the year.
In response to market dynamics, Ford introduced a new “Flash” trim for the 2024 F-150 Lightning lineup. The 2024 F-150 Lightning Flash will be priced at around $70,000, offer a range of 320 miles, feature a technology-rich interior, and include a heat pump. This trim is designed to address market demands effectively, drawing features from the XLT and Lariat models.
Ford previously set a goal of reaching a run rate of 600,000 EVs per year, but it has decided to postpone this target until the following year, indicating a slower-than-anticipated demand for EVs. Ford’s overall revenue for the third quarter increased by 11% to reach $44 billion. However, due to factors such as the UAW strike and a tentative agreement reached recently, Ford is withdrawing its full-year guidance.
In summary, Ford’s third-quarter earnings reflect the complexities and challenges of the electric vehicle market. While the automaker has made strides in boosting EV sales, profitability remains a significant concern due to pricing pressures and customers’ willingness to pay premiums for EVs. Ford’s decision to delay investments in the face of these challenges underscores the evolving nature of the EV market and the competitive dynamics with companies like Tesla. As the industry continues to navigate these issues, it’s clear that strategies to balance demand with profitability are crucial for success in the growing electric vehicle sector.
Writing by Alireza Sabet; Editing by Sarah White