Dive Brief:
- Ford Motor Co. lost more than half a billion dollars on its Model e division year over year as it lowered prices to remain competitive in the market, according to its Q1 earnings report released Wednesday.
- The automaker’s electric vehicle segment reported an EBIT loss of $1.3 billion during the quarter. Model e revenues were down 84% — from $700 million in Q1 2023 to just $100 million last quarter — and volumes were down 20%.
- “We've seen prices coming down quite dramatically and that's why we haven't been able to keep up from a cost reduction standpoint,” CFO John Lawler said during the company’s earnings call.
Dive Insight:
CEO Jim Farley told analysts that Ford needs to make “tremendous progress” on Model e as the company expects the division to lose between $5 billion and $5.5 billion this year. Model e lost $4.7 billion in 2023.
“It’s a huge drag, not just on Ford, but on our whole industry, even for pure-play EV players,” he said. “We’re very clear-eyed about that.”
Ford aims to build a “sustainably profitable” EV business, with Farley citing flat costs as a turning point for the segment this year.
But an immediate upside to EV price cuts? More volume.
When Ford dropped the price of its Mustang Mach-E by 17% in February, its volume went up 141%, Farley said.
“That's telling us that the more affordable we can make great product, the more attractive it is to these mainstream EV adopters,” he said.
Earlier this month, Ford announced it is retiming the launch of EVs and expanding its hybrid offerings. Profitability at the automaker’s Ford Blue division, which includes hybrid models, fell from $2.6 billion EBIT in Q1 last year to $900 million in Q1 2024, according to the earnings report.
Meanwhile, the company is reducing its capital spend in 2024, as it initially expected to spend $10 billion, but will now look to spend between $8 billion to $9 billion, according to its updated guidance.
