Summary
– Ford reported significant losses on EVs in the first quarter
– Sales were down 20% but revenue was down 84% due to industry-wide EV price cuts
– Ford CEO predicted an EV price war in 2022
– Ford is incrementally re-engineering the Mach-E to lower manufacturing costs and cutting prices
– Plans for more affordable next-generation EVs are in place, with cost parity with internal-combustion vehicles potentially by 2030.
Article
In a recent quarterly earnings call, Ford reported significant losses on their electric vehicles (EVs), with their EV unit experiencing a loss of $1.3 billion in the first quarter. This equated to roughly $132,000 for each of the approximately 10,000 EVs sold during that period. Despite this, Ford is promising lower-priced models in the future. Sales were down 20% from the previous year, with revenue dropping by 84%, which Ford attributed to industry-wide EV price cuts.
Ford CEO Jim Farley predicted an upcoming EV price war in 2022, although it seems that the automaker was not fully prepared for it. Ford’s CFO John Lawler stated that they have managed to reduce costs by $5,000 for the Mustang Mach-E crossover, but the decrease in revenue is outpacing cost reductions. Ford has been making incremental re-engineering changes to the Mach-E to lower manufacturing costs and has also reduced the prices of the vehicle. However, Ford still needs to recover the hundreds of millions of dollars invested in the development of next-generation EVs, which is not expected to happen for several years.
The next-generation EVs from Ford will prioritize both profitability and lower prices. A more expensive next-generation electric pickup truck, as well as a three-row SUV, have been delayed. Farley has mentioned that achieving cost parity with internal combustion vehicles may not occur until 2030. However, plans for an LFP battery plant in Michigan that Ford views as crucial for EV affordability could potentially hasten the process. The introduction of higher-volume models beyond the current Mach-E and Lightning may also help resolve the issue of EV profitability.
Ford is making efforts to reduce costs and improve the affordability of EVs, as reflected in their strategies for the Mach-E and other future models. The automaker is working towards achieving cost parity with traditional internal combustion vehicles by 2030. The development of an LFP battery plant in Michigan is seen as a key factor in making EVs more affordable. Ford is also looking to introduce higher-volume EV models in the future to improve profitability in this segment of the market.
Despite significant losses in their EV unit, Ford remains committed to developing and selling electric vehicles. The company is anticipating an upcoming EV price war and is making adjustments to their production processes to reduce manufacturing costs. Ford aims to recoup their investments in next-generation EV development in the coming years, focusing on profitability and affordability for consumers. By delaying certain high-cost models and prioritizing cost reduction initiatives, Ford hopes to improve the financial performance of their EVs in the long term.
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