Photo: Ford
Ford announced the second-quarter financial results, and its EV division Model e stuck out like a sore thumb, with mounting losses projected to increase in the year's second half. Ford also announced that its annual production capacity target of 600,000 EVs will not be reached until the end of next year.
Ford was one of the legacy carmakers bullish about its prospects of surpassing Tesla. Not only that, but the plan seemed to be working, with the Mustang Mach-E receiving great feedback. In November 2021, a euphoric Jim Farley announced doubling the EV production targets for 2023 to 600,000 units. With the imminent arrival of the F-150 Lightning, this should've been a home run for Ford.
Still, the Blue Oval would soon discover that making an electric vehicle is not as easy as replacing the engine and gearbox with an electric motor and a battery. You need to first have those parts, which means building a supply chain and new manufacturing facilities. Launching a new electric vehicle is easy, but convincing people to keep buying is another matter. Ford is discovering all this the hard way, with hundreds of EVs piling up on dealer lots and new production facilities eating up tons of money.
When it announced the second-quarter sales, Ford felt the need to give EV sales in the US a positive spin. By changing the reference, the Blue Oval announced increased EV sales "in June" while forgetting that it was a quarterly report. The sales may have been up in June because June 2022 was not a very good month, but the second-quarter results were down 2.8 percent compared to 2022. If you think Ford F-150 Lightning only started sales at the end of May 2022, you see that Q2 2022 was not a very good comparison base, and Ford somehow managed to sell fewer EVs this year.
Now that Ford has shown the financial results, it's apparent that Ford EV global sales were doing better in Q2, with 34,000 EVs sold worldwide. This is 41.7% more than in Q2 2022, allowing Ford Model e to report $1.8 billion in revenue. Still, losses at Ford's EV division have accelerated, reaching $1.08 billion in the second quarter, up from $0.7 billion in Q1 2023 and $0.5 billion in Q2 2022. To its credit, Ford reduced the negative margin from -102% to -59%.
On the other hand, Ford has updated its 2023 guidance to show a much bigger financial loss than previously communicated. At the end of the first quarter, Ford expected to lose about $3 billion in 2023 at its Model e division. Now, the number is 50% higher, to $4.5 billion. Ford began comprehending the investments needed to build new battery factories and overhaul existing car plants to produce electric vehicles.
While the bigger picture zooms out, it reveals that building electric vehicles is much more complicated than Ford predicted. This is why Jim Farley wished he didn't announce doubling the production targets in 2023. He updated investors with a new timeline, promising to reach an annual production capacity of 600,000 at the end of 2024. This is one year later than Jim Farley announced in 2021 and reiterated no later than March.
The good news for Ford is that Ford Blue and Ford Pro divisions are doing much better than its EV business, allowing it to sustain these losses for as long as it takes. Ford will eventually break even on its EVs as the past investments bring benefits. And will learn to produce better EVs that people want to buy. Soon, Ford will also be the first carmaker with an LFP battery plant in North America, which should bring the costs down.
Still, the Blue Oval would soon discover that making an electric vehicle is not as easy as replacing the engine and gearbox with an electric motor and a battery. You need to first have those parts, which means building a supply chain and new manufacturing facilities. Launching a new electric vehicle is easy, but convincing people to keep buying is another matter. Ford is discovering all this the hard way, with hundreds of EVs piling up on dealer lots and new production facilities eating up tons of money.
When it announced the second-quarter sales, Ford felt the need to give EV sales in the US a positive spin. By changing the reference, the Blue Oval announced increased EV sales "in June" while forgetting that it was a quarterly report. The sales may have been up in June because June 2022 was not a very good month, but the second-quarter results were down 2.8 percent compared to 2022. If you think Ford F-150 Lightning only started sales at the end of May 2022, you see that Q2 2022 was not a very good comparison base, and Ford somehow managed to sell fewer EVs this year.
Now that Ford has shown the financial results, it's apparent that Ford EV global sales were doing better in Q2, with 34,000 EVs sold worldwide. This is 41.7% more than in Q2 2022, allowing Ford Model e to report $1.8 billion in revenue. Still, losses at Ford's EV division have accelerated, reaching $1.08 billion in the second quarter, up from $0.7 billion in Q1 2023 and $0.5 billion in Q2 2022. To its credit, Ford reduced the negative margin from -102% to -59%.
On the other hand, Ford has updated its 2023 guidance to show a much bigger financial loss than previously communicated. At the end of the first quarter, Ford expected to lose about $3 billion in 2023 at its Model e division. Now, the number is 50% higher, to $4.5 billion. Ford began comprehending the investments needed to build new battery factories and overhaul existing car plants to produce electric vehicles.
While the bigger picture zooms out, it reveals that building electric vehicles is much more complicated than Ford predicted. This is why Jim Farley wished he didn't announce doubling the production targets in 2023. He updated investors with a new timeline, promising to reach an annual production capacity of 600,000 at the end of 2024. This is one year later than Jim Farley announced in 2021 and reiterated no later than March.
The good news for Ford is that Ford Blue and Ford Pro divisions are doing much better than its EV business, allowing it to sustain these losses for as long as it takes. Ford will eventually break even on its EVs as the past investments bring benefits. And will learn to produce better EVs that people want to buy. Soon, Ford will also be the first carmaker with an LFP battery plant in North America, which should bring the costs down.
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