It's not a good look.
Ford on March 2, 2022, surprised the automotive world and consumers by announcing an unprecedented reorganization.
The Dearborn, Mich.-based automaker reshuffled its operations by creating two separate divisions to speed up its transition to electric vehicles: one division focused on gasoline cars, or Ford Blue, which would continue to chase profits, and one division specialized in battery powered vehicles (BEV), Ford Model e, which would focus on growth and technology.
At the time, the company said that it would spend $50 billion on electric vehicles between 2022 and 2026. It previously planned to spend $30 billion in the five years ending in 2025.
The carmaker was on a roll. It was planning to start producing the F-150 Lightning, the electric version of the iconic and best-selling F-150 pickup truck. The new vehicle had already received more than 150,000 reservations. Ford was already producing the Ford Mustang Mach-E, an SUV that rivals the Model Y produced by Tesla.
In addition, the company, led by Jim Farley, was also building two battery plants in Kentucky, and a third battery plant and an electric truck factory in Tennessee.
Ford
"This isn’t the first time Ford has reimagined the future and taken our own path,” said Ford Executive Chair Bill Ford. "We have an extraordinary opportunity to lead this thrilling new era of connected and electric vehicles, give our customers the very best of Ford, and help make a real difference for the health of the planet.”
Huge Loss
A little over a year later, Ford Model e is a pit of losses, while Ford Blue remains the cash cow of the whole group. Ford has just released its first quarter results. For the first time, the carmaker has detailed its earnings by division.
It appears that Ford Model e recorded a loss before interest and taxes of $700 million. This is $100 million more than in the fourth quarter of 2022. The margins are also in the red. The EBIT margin (Earnings Before Interest and Taxes), which allows investors to assess the true costs of the activity, is -102.1%. This is more than twice as much as in the fourth quarter of 2022, a period during which the EBIT margin was -40.4%.
On the revenue side, the sales of electric vehicles, amounted to $700 million in the first three months of the year, is less than half of the $1.6 billion in revenue generated by Ford Model e in the last quarter of 2022.
One fact is striking: Ford (F) only delivered 12,000 electric vehicles in the first quarter, which means that the carmaker lost $58,333 for each clean car sold during this period.
Ford explained this poor performance by higher costs, mainly higher engineering, and spending-related expenses, commodities and other inflationary pressures. Weak sales volumes are due, the carmaker said, to scheduled downtime at the Cuautitlan assembly plant in Mexico, to increase the Mach-E capacity to 35 jobs per hour.
Production of the Ford Mustang Mach-E is expected to reach 270,000 units in 2023, the automaker had previously indicated. To achieve this, the carmaker had planned to significantly ramp up production at the Mexican plant. But to prepare for it, Ford had to pause production at the Mexican facility starting last January.
Gas Cars Are Fine
Ford also had to lower the price of the Ford Mach-E after Tesla cut prices in January. The Blue Oval has just slashed the price of the SUV again to keep it competitive after yet another price drop for Tesla's Model Y
Last month, the Blue Oval said it expects an operating loss of $3 billion for Ford Model e this year. This would be more than the $2.1 billion operating loss recorded in 2022.
The automaker is however optimistic, since it expects positive operating margins in 2026. The EBIT margin should be 8%, anticipates Ford, which intends to mass produce vehicles for the rest of this year.
It said that the Cuautitlan plant would have a production capacity of 210,000 Mach-E this fall and 150,000 F-150 Lightning.
In the meantime it is the gasoline cars which continue to ensure profits for Ford.
Ford Blue reported net income before interest and taxes of $2.6 billion in the first quarter for an operating margin of 10.4%.
