Ford Slashes Mach-E Production, Post Unexpected Loss.
Ford Motor Company’s 3rd quarter earnings uncovered climbing electric vehicle (EV) deficits chiefly attributable to waning demand and the EV cost battle prompted by Tesla in the beginning of 2021.
Ford was able to move 20,962 electrical cars in Q3, narrowly surpassing General Motors, which was mainly due to a higher production of the Mustang Mach-E. Sales for the Mach-E soared by 42.5 percent during Q3, with 14,824 vehicles sold, 5,872 of which were purchased in the month of September.
The car manufacturer’s electric vehicle shipments experienced an expansion of 44 percent, leading to a y-o-y expansion of 26 percent in earnings to $1.8 billion for the Ford Model e EV arm.
Regrettably, that’s where the positives for Ford’s electric vehicle enterprise reach a conclusion. In spite of the U-turn in output, profits were still substantially diminished in the third quarter with the company displaying an operating loss of $1.3 billion, larger than its figure from the second quarter which was $1.1 billion, moreover compounded by more than double its deficit from Q3 2022.
Ford recorded an approximate loss of $36,000 for each electric vehicle it sold in the preceding quarter, exceeding the approximated $32,350 EV loss in the second quarter. The auto-manufacturer anticipates a total annual deficit of $4.5 billion for its electric line. But why?
Ford has acknowledged that their Q3 loss is “attributable to continued investment in next-generation EVs and challenging market dynamics.” The carmaker has further elaborated on the latter point, noting that “many North American customers interested in buying EVs are unwilling to pay premiums for them over gas or hybrid vehicles.” This has put a strain on EV prices and profitability, according to Ford.
“In order to ensure that EV investments are adequately balanced with customer demand,” the company declared that it is reducing its planned EV investments by approximately $12 billion. This move is meant to ensure that the company is appropriately pacing its EV investment in relation to customer needs.
Ford is reducing the production of their Mustang Mach-E and delaying the starting date of one of their two planned battery plants in Kentucky associated with SK On. The organisation hasn’t indicated how long this postponement of EV assets or battery plant will be. The second battery facility in Kentucky and the Blue Oval City building in Tennessee remain unaltered though.
“Contrary to popular belief, the market for electric vehicles is still growing – it’s just at a slower rate than the industry anticipated,” stated Ford Chief Financial Officer John Lawler during an earnings call, as reported by Automotive News. Lawler went on to say that, due to the softening in demand, Ford will need less EV capacity in the near future.
He emphatically stated that they had no intention of abandoning plans for their second generation electric vehicles, inclusive of a full-size pickup truck and a 3-row utility vehicle.
Additional strain will almost certainly be placed on Ford’s budget due to the proposed understanding with the UAW, which entails a 25% wage hike for 57,000 personnel throughout five years. According to Reuters, John Lawler – Ford’s Chief Financial Officer – declared in a press conference on Thursday that the new contract is likely to bring about an additional $850 to $900 charge of labor per car.
Ford gauged that the labor stoppage initiated by the UAW and enduring for 41 days resulted in output disruption of roughly 80,000 cars, bringing about an expense of $1.3 billion, ultimately erasing almost $1.2 billion in profits during the third quarter.
Sources: Ford Motor Company, Reuters, Automotive News