Umair Gaines
Electric vehicles (EVs) are the future, but for Ford, the road ahead is bumpy. The company is facing significant financial losses in its electric vehicle division, Ford Model e, with a projected loss of $4.5 billion in 2023, up from $2.1 billion in 2022. This loss is despite increased revenue and a 44% increase in EV deliveries in Q3. Ford lost an estimated $36,000 on each of the 36,000 electric vehicles delivered to dealers in Q3, surpassing losses in the previous quarter. The company is caught in a bind, with customers balking at premium prices and a tentative agreement with the United Auto Workers union adding to labor costs. Ford is now pausing investments in new EV factories and battery plants, but CEO Jim Farley remains committed to EV expansion, insisting that the next generation of Ford EVs will be profitable.
| Characteristics | Values |
|---|---|
| Loss per electric vehicle sold in Q3 2023 | $36,000 |
| Loss per electric vehicle sold in Q2 2023 | $32,350 |
| Total loss in Q3 2023 | $1.3 billion |
| Total loss in Q2 2023 | $1.1 billion |
| Total loss in Q3 2022 | $0.65 billion |
| Number of electric vehicles sold in Q3 2023 | 20,962 |
| Number of electric vehicles sold in Q2 2023 | 15,468 |
| Projected loss for full-year 2023 | $4.5 billion |
| Projected EV production capacity by 2024 | 600,000 per year |
| Investment in new EV factory in Kentucky | $12 billion (paused) |
| Wage increase for 57,000 workers over 4.5 years | 25% |
| Additional labor cost per vehicle | $850 to $900 |
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What You'll Learn
- Ford lost $36,000 on each of the 36,000 electric vehicles delivered to dealers in Q3
- Ford's EV losses continued to rise in Q3, with an operating loss of $1.3 billion
- Ford's tentative agreement with the UAW includes a 25% wage increase for 57,000 workers
- Ford lost $1.8 billion in its EV division so far in 2023, with a projected $4.5 billion loss for the year
- Ford is cutting Mustang Mach-E production and delaying a battery plant in Kentucky
Ford lost $36,000 on each of the 36,000 electric vehicles delivered to dealers in Q3
Ford Motor Company (F.N) lost an estimated $36,000 on each of the 36,000 electric vehicles it delivered to dealers in the third quarter of 2023. This resulted in an operating loss of $1.3 billion, up from $1.1 billion in the previous quarter and more than double its loss from Q3 2022. The loss per vehicle also increased from the second quarter's estimated loss of $32,350 per EV.
The company attributed the Q3 loss to "continued investment in next-generation EVs and challenging market dynamics." Ford noted that many North American customers interested in purchasing EVs are reluctant to pay higher prices for them compared to traditional gas or hybrid vehicles. This has put pressure on EV prices and profitability.
In response to the losses, Ford has decided to scale back its planned investments in EV development. The company is cutting some Mustang Mach-E production and delaying the opening of one of two battery plants in Kentucky, originally planned with partner SK On. Ford also withdrew its full-year results forecast due to "uncertainty" over the ratification of its deal with the United Auto Workers (UAW) union, which includes a 25% wage increase for 57,000 workers over 4-5 years.
Despite the losses, Ford's EV deliveries increased by 44% in Q3, resulting in a 26% growth in revenue to $1.8 billion for the Ford Model e EV unit. However, the higher volume of sales was not enough to offset the losses, and Ford's EV business continues to face challenges in the market.
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Ford's EV losses continued to rise in Q3, with an operating loss of $1.3 billion
Ford Motor Company has been facing financial challenges, particularly with its electric vehicle (EV) business. In the third quarter of 2023, Ford's EV losses continued to rise, resulting in an operating loss of $1.3 billion. This loss was despite a 44% increase in EV deliveries, with Ford selling 20,962 electric vehicles during this period. The loss per vehicle was estimated to be around $36,000, surpassing the previous quarter's estimated loss of $32,350 per EV.
The company attributed the rising losses to various factors, including price wars among EV manufacturers, with Ford CFO John Lawler stating that revenue was "dropping faster than we can take out the cost." Additionally, Ford faced increased labour costs due to a tentative agreement with the United Auto Workers (UAW) union, which included a 25% wage increase for 57,000 workers. The company also experienced lost production due to the UAW's 41-day strike, resulting in an estimated loss of $1.3 billion and impacting its third-quarter income.
In response to the mounting losses, Ford has made significant cuts to its EV plans, including delaying the launch of its next-generation electric F-150 Lightning truck and scaling back about $12 billion in planned EV investments. The company is focusing on balancing the pace of EV investment with customer demand and addressing premium pricing concerns. Ford CEO Jim Farley has expressed confidence in the company's ability to turn a profit in the EV business in the near future, citing the planned next generation of EVs as a key factor.
While Ford's EV business faces challenges, its traditional internal combustion vehicles continue to drive profits. Ford Pro, the company's unit for internal combustion vehicles, posted strong results in the quarter, with EBIT of $3 billion and a 36% revenue increase to $18 billion. However, Ford Blue, the unit handling sales of gasoline-powered cars, reported a decline in sales and revenue, resulting in a significant drop in EBIT for traditional sales.
Looking ahead, Ford projects lower earnings for 2025, with an estimate of $7.0 billion to $8.5 billion in earnings before interest and taxes. The company foresees a tougher pricing environment and plans to mitigate the impact of policy changes, such as the potential removal of the $7,500 consumer tax credit available on certain EVs. Despite the challenges, Ford remains committed to transitioning from traditional gas-powered vehicles to EVs and aims to address profitability concerns in the EV market.
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Ford's tentative agreement with the UAW includes a 25% wage increase for 57,000 workers
Ford Motor Co. and the United Auto Workers (UAW) have reached a tentative agreement that includes a 25% wage increase for 57,000 workers over four and a half years, ending a 41-day strike at some of Ford's biggest factories. The deal will raise the top wage from the current $32.32 an hour by over 30% to more than $40 an hour, and the starting wage will increase by 68% to over $28 an hour over the life of the contract. Workers will receive an immediate 11% wage increase upon ratification.
The agreement also includes cost-of-living adjustments and reduces the time for new workers to reach the top wage scale from eight years to three years. It also includes improvements for current retirees, workers with pensions, and those with 401(k) plans. Additionally, the deal includes the right to strike over plant closures, a first for the union.
The tentative agreement comes as Ford has been facing challenges with its electric vehicle (EV) business. The company has been losing money on each electric vehicle it sells, with an estimated loss of $36,000 per EV in the third quarter of 2023. As a result, Ford has decided to cut its investment in EV production and pause its plans for a new EV factory in Kentucky. The company is instead shifting its focus to its commercial vehicle unit and gas-electric hybrids.
Despite the challenges with its EV business, Ford reported a third-quarter profit of $1.2 billion, compared to a loss of $827 million in the same quarter last year. The improved financial performance is partly due to higher revenue from its Ford Pro commercial vehicle business and Ford Blue combustion and hybrid vehicle business.
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Ford lost $1.8 billion in its EV division so far in 2023, with a projected $4.5 billion loss for the year
In 2023, Ford lost an estimated $36,000 on each of the 36,000 electric vehicles it delivered to dealers in the third quarter. This resulted in an operating loss of $1.3 billion for that quarter, with a projected loss of $4.5 billion for the year. The losses were attributed to various factors, including the high production costs of EVs, industry-wide pricing pressure, and reduced customer demand due to premium prices.
Ford's EV division, Model e, reported a full-year EBIT loss of $4.7 billion on sales of 116,000 EVs, averaging a loss of over $40,000 per vehicle. This division's losses were a significant drain on company funds, with Ford Pro and Ford Blue generating much higher profits per vehicle sold.
To address the losses, Ford has made significant cuts to its EV plans, including delaying the launch of its next-generation electric F-150 Lightning truck and axing a three-row electric SUV. The company is also scaling back its planned EV investments by about $12 billion, cutting some Mustang Mach-E production, and delaying the opening of one of two battery plants in Kentucky.
Despite the losses, Ford has reported strong demand for electric vehicle sales in its Ford Pro unit, with orders from the US Postal Service and Ecolab, a global sustainability company. The company has also made strides in reducing costs, removing about $5,000 in expenses for each Mustang Mach-E. However, revenue continues to decline faster than cost reduction.
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Ford is cutting Mustang Mach-E production and delaying a battery plant in Kentucky
Ford Motor Company (F.N) has decided to cut Mustang Mach-E production and delay a battery plant in Kentucky. This decision comes as the company is facing challenges in the electric vehicle (EV) market. Ford lost an estimated $36,000 on each of the 36,000 electric vehicles it delivered to dealers in the third quarter of 2023, resulting in an operating loss of $1.3 billion. The company attributed this loss to various factors, including the higher cost of production and the reluctance of customers to pay premiums for EVs over gas or hybrid vehicles.
In response to the losses, Ford is scaling back its planned EV investments by about $12 billion. This includes cutting some Mustang Mach-E production and delaying one of two battery plants planned in Kentucky with partner SK On. Ford Chief Financial Officer John Lawler acknowledged that EV demand has "softened" and that the company needs to balance the pace of EV investment with customer demand. However, he also emphasized that EVs are still growing, just at a slower pace than expected.
The Mustang Mach-E has been a significant contributor to Ford's EV sales, with a 42.5% increase in sales in the third quarter of 2023 compared to the previous year. Despite this, Ford's EV losses continued to rise in the third quarter, with a 26% growth in revenue year-over-year, amounting to $1.8 billion for the Ford Model e EV unit. The company's electric pickup, the F-150 Lightning, also experienced a 46% slip in sales in the third quarter.
Ford's decision to slow down Mustang Mach-E production and delay the battery plant in Kentucky reflects the challenges faced by the company in the EV market. The company is navigating between addressing the demand for EVs and managing the higher costs associated with their production. Ford's tentative agreement with the United Auto Workers (UAW) union, which includes a 25% wage increase for 57,000 workers over 4-1/2 years, further adds to the pressure on the company's costs.
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Frequently asked questions
Yes, Ford is losing money on electric vehicles. In the third quarter of 2023, Ford lost $36,000 on each of the 36,000 electric vehicles it delivered to dealers, resulting in an operating loss of $1.3 billion.
There are several reasons why Ford is losing money on electric vehicles. Firstly, the company is facing competition from Tesla, which has a strong brand and cost advantage. Additionally, Ford has made concessions in a deal with the United Auto Workers union, which will add $850 to $900 in labor costs per vehicle. Moreover, Ford has had to reduce the price of its electric vehicles due to a price war triggered by Tesla, further impacting profitability.
Ford has decided to cut back on its investments in electric vehicles by pausing $12 billion in spending on a new EV factory in Kentucky. The company is also shifting its focus to its commercial vehicle unit and plans to increase sales of gas-electric hybrids. Ford's CEO, Jim Farley, remains committed to the company's EV expansion and believes that the next generation of Ford EVs will be profitable.
