Ford has revealed its earnings for the first quarter of 2023. While its EV unit may seem to be losing cash hand over fist, there’s more to it than that. Meanwhile, Ford’s ICE and commercial operations are raking in the moolah, keeping the company profitable for the time being.
For the first time, Ford has detailed earnings by its new divisions that were formed just over a year ago —namely, Ford Model e, Ford Blue and Ford Pro. As the name implies, Ford Model e deals in electric vehicles and digital connectivity, while Ford Blue handles the production of internal combustion vehicles. The third unit, Ford Pro, focuses on commercial vans and trucks.
The headline figure from the earnings report is that the legacy car maker is losing an average of $58,333 per electric vehicle sold in the first three months of 2023. Ford only delivered 12,000 EVs for the first quarter, and in turn, Ford Model e lost $700 million (before interest and taxes) in the same period. Meanwhile, EV sales only generated $700 million in revenue, compared to $1.6 billion in the last quarter of 2022.
No matter how you slice it, just under $60,000 per unit is a sizeable chunk of change to lose on each EV. However, there are several factors to consider. Firstly, volume is reduced thanks to scheduled downtime at the Cuautitlan plant in Mexico which produces the Mustang Mach-E. The temporary slowdown in production is to increase output at the plant to 210,000 per year by the end of 2023.
Similarly, Ford’s EV unit is hemorrhaging cash while scaling production. That includes $3.5 billion being spent on the Ford-owned LFP battery plant in Marshall, Michigan, and BlueOval City in Tennessee, which will produce Ford’s next-generation electric truck in 2025, with a capacity of 500,000 units each year.
Ford’s ICE And Commercial Vehicles Rake In The Cash
It’s a different story for Ford Blue, which reported net income before interest and taxes of $2.6 billion in the first quarter, for an operating margin of 10.4%. Leading this charge was the F-150, while Ford retains its position as America’s leading truck manufacturer, building one every 30 seconds.
While new product costs and inflationary pressures tempered profits, Ford Blue and Ford Pro helped see the Blue Oval return a 4.2% net income margin —the highest figure seen in over a year.
Sink Or Swim For EVs
Despite the staggering headline loss on each EV, there may be no cause for alarm. Unlike other manufacturers, Ford isn’t willing to throw in the towel on ICEs just yet, and the sustained profitability from the Ford Blue line gives the EV division a bit of breathing room.
While Tesla’s Model Y price cuts won’t help Ford’s bottom line —especially as the legacy automaker has had to make similar slashes to the Mach E’s price to keep it competitive — a higher volume of EV sales in Q2 could reduce the average loss.
Nevertheless, Ford’s play into the EV space is a long-term one, with the company predicting a $3 billion operating loss for EVs in 2023 —more than the $2.1 billion operating loss recorded in 2022. But with new models on the horizon, improved production facilities, and increased capacity set to come online in the next few years, investors will be keeping a close eye on how Ford performs. In fact, financial and investing advice company The Motley Fool reckons now may be the time to get in on the Ford action. They note that, while the EV business will take years to grow, if investors start to see improvements in margins over the next few quarters, it may be a sign of good things to come.
The bad news. Here's the kicker about Ford's record EV sales: The company is still burning cash on each EV that rolls off its production line. In fact, Ford previously estimated its EV business unit, Model e, would lose roughly $4.5 billion in 2023.
Ford has canceled or postponed $12 billion in electric vehicle investments after losing about $60,000 on every electric vehicle it has produced. The gasoline-powered version of the F-150 pick-up truck has consistently been among the bestselling vehicles in North America since 1976.
EV sales at Ford are up 25.9% year-to-date compared to a year ago, while sales were up 80.8% from last February with 6,368 EVs sold in the month versus 3,523 last year. Much of the growth in EVs came from the F-150 Lightning pickup, which ticked up 93% in February from last year with 2,578 trucks sold in the month.
Ford released its fourth-quarter financial results Tuesday evening. While the carmaker expects to make over $10 billion in profit this year, it also expects to lose about $5 billion on its push to make and sell more electric vehicles.
The reasons given were an unwillingness by customers to pay extra for its electric vehicles. You see, they're too expensive, and now Ford's massive transformation into an EV company is now going to take a lot longer than before.
Ford lost an estimated $36,000 on each of the 36,000 EVs it delivered to dealers in the third quarter, the company said in October, after announcing earlier it would slow the ramp-up of money-losing EVs, shifting investment to Ford's commercial vehicle unit and citing plans to quadruple sales of gas-electric hybrids ...
The Dearborn, Michigan-based automaker sold 4,674 EVs in January, compared with 5,247 units sold during the same period last year. The EV demand slowdown due to elevated interest rates, which means higher loan payments for buyers, has prompted some automakers to cut production.
One major reason why Tesla is valued so much higher than its peers is growth. The electric-car maker increased its sales by 37 percent last year. Wall Street analysts anticipate another 26 percent of upside this year. GM's sales rose 28 percent last year, while F shrank by 17 percent.
The Ford Motor Company reported total debt around 149.2 billion U.S. dollars in 2023. Total debt comprises automotive debt, credit debt, and other debt.
When it comes strictly down to numbers of miles and years, an EV will likely outlast an internal combustion engine (ICE) vehicle. With regular use, the average lifespan of a gas vehicle is 150,000 miles or eight years, and EVs can last up to 200,000 miles, or about 12 years.
Revenue excluding Ford Credit of $41.18 billion was slightly shy of Wall Street forecasts of $41.22 billion, according to LSEG data. Ford said its EV unit posted a loss in earnings before interest and taxes of $1.3 billion, bringing its nine-month EBIT loss to $3.1 billion.
The price of electric cars is plummeting so fast that they're now almost as cheap as gas-powered cars. Since EVs first hit the market, car buyers have had to pay a steep premium if they wanted a car that ran on batteries instead of a gas engine.
Ford sales declined for the first time this year in October, during which the company navigated a six-week United Auto Workers strike and disappointing third-quarter earnings. The automaker's total vehicle sales declined 5.3% from October 2022 to 149,938, marking the brand's first year-over-year decline of 2023.
In September 2009, Ford entered into an agreement with the Department of Energy and borrowed $5.9 billion as part of a loan program created to finance automotive projects designed to help vehicles built in the U.S. meet higher mileage requirements and lessen U.S. dependence on foreign oil.
Deliveries of Ford's Mustang Mach-E grew in Q3, but not enough to counteract signficant losses elsewhere in Ford's Model e EV unit. Few legacy carmakers have been as committed to electric vehicles as Ford. But, that commitment is coming at a price.
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