Ford Motor Company recently announced its financial report for the first quarter of 2023. The financial report shows that the company’s electric vehicle and digitalization business unit-Ford Model e lost $700 million (before interest and taxes) in the quarter, while only 12,000 electric vehicles were sold, an average loss of 5.8 per vehicle. million US dollars. Meanwhile, EV sales generated just $700 million in revenue, compared to $1.6 billion in the fourth quarter of 2022. By contrast, the company’s internal combustion engine and commercial vehicle units — the Ford Blue and Ford Pro — are profitable, bringing steady revenue to the company.
This is the first time Ford has reported earnings under the new divisions. Ford Model E is responsible for electric vehicles and digitalization, Ford Blue is responsible for internal combustion engine vehicle production, and Ford Pro is responsible for commercial vans and trucks. This division was made at the beginning of 2022 in order to adapt to changes in the automotive industry and improve the company’s competitiveness.
There are several reasons for Ford’s Model e losses. First, sales of the Mustang Mach-E electric vehicle produced at the plant in Cuatitlán, Mexico, have declined due to a halt in production at the plant. The pause is to boost the factory’s capacity, which is planned to reach 210,000 vehicles a year by the end of 2023. Second, the Ford Model e is investing heavily in scaling up the production of electric vehicles. That includes spending $3.5 billion on Ford’s own LFP battery plant in Marshall, Mich., and Blue Oval, Tennessee, which will produce Ford’s next-generation electric trucks in 2025, with a capacity of 500,000 a year. In addition, the Ford Model e is also facing fierce competition in the market. Rivals such as Tesla continue to lower prices, forcing Ford to also lower the price of the Mustang Mach-E.
In contrast, the Ford Blue and Ford Pro performed well. Ford Blue posted a pretax profit of $2.6 billion in the first quarter, with an operating margin of 10.4 percent. The biggest contributor of these is the F-150 pickup, while Ford maintains its status as the leading U.S. truck maker, producing one every 30 seconds. While new product costs and inflationary pressures weighed on profit levels, the Ford Blue and Ford Pro still helped the company achieve a 4.2 percent net profit margin — the highest in more than a year.
While the statistic of losing nearly $60,000 on every EV sold is staggering, don’t worry too much. Unlike other automakers, Ford hasn’t given up on combustion-engined vehicles, relying on its combustion-engine and commercial-vehicle businesses to provide some cushion to its electric-vehicle business. While Tesla’s Model Y price cuts hit Ford’s bottom line, sales of electric vehicles could rise in the second quarter, lowering the average loss.
Ford’s foray into electric vehicles is a long-term strategy, and the company expects an operating loss from its electric vehicle business of $3 billion in 2023 — up from $2.1 billion in 2022. But investors will be keeping a close eye on Ford’s performance as it rolls out new models, improves production facilities and ramps up production capacity over the next few years. In fact, financial and investment advisory firm The Motley Fool thinks now might be a good time to invest in Ford. They noted that while the EV business will take a few years to grow, it could bode well if investors see improved margins in the coming quarters.
