Energy & Critical Metals
Ford: Consumers Just Don’t Want EV’s Yet
After the market closed on July 27, Ford Motor Company (NYSE: F) reported 2Q 2023 financial results which beat analysts’ forecasts on
The post Ford:…
After the market closed on July 27, Ford Motor Company (NYSE: F) reported 2Q 2023 financial results which beat analysts’ forecasts on all key metrics.
Specifically, 2Q 2023 EPS, revenue, and operating income totaled US$0.72, US$45 billion, and US$3.8 billion versus consensus projections of US$0.54, US$43.2 billion, and US$3.2 billion, respectively.
However, investors have pushed the stock more than 4% lower because of the growing losses experienced in Ford’s electric vehicle (EV) business and gloomier forecasts about future losses and production rates. To its credit, Ford breaks out details of its EV business which other legacy automakers like General Motors Company (NYSE: GM) do not.
The good news is that Ford wholesaled what appears to be a quarterly record 34,000 EV units to its dealer network in 2Q 2023, up from around 12,000 in 1Q 2023 and from about 24,000 in the year-ago period. Correspondingly, 2Q 2023 revenue increased to US$1.8 billion in 2Q 2023 versus US$700 million and US$1.3 billion in 1Q 2023 and 2Q 2022, respectively.
FORD MOTOR COMPANY — SELECTED ELECTRIC VEHICLE DATA AND PROJECTIONS
| 2Q 2023 | 1Q 2023 | Full-Year 2022 | Full-Year 2021 | |
| EV Units Sold to Dealer Network | 34,000 | 12,000 | 96,000 | 61,000 |
| Change from Year-Ago Period | 44% | -32% | 57% | |
| Revenue, in millions of US$ | $1,800 | $707 | $5,300 | $3,100 |
| Change from Year-Ago Period | 38% | -32% | 71% | |
| Operating Income, in millions of US$ | ($1,100) | ($722) | ($2,100) | ($900) |
| Operating Income as a % of Revenue | -56.9% | -102.1% | -40.6% | -28.8% |
| Forecast of Full-Year 2023 Operating Income, in millions of US$ | ($4,500) | ($3,000) | ||
| Revenue Per Vehicle | $52,941 | $58,929 | $55,208 | $50,820 |
| Operating Income Per Vehicle | ($32,353) | ($60,167) | ($21,875) | ($14,754) |
| Management’s Projection of Future Operating Margin | 8% Sometime in Future | 8% in 2026 | ||
| Date Ford Will Achieve 600,000 EV Annual Production Rate | Sometime During 2024 | End of 2023 | ||
| Date Ford Will Achieve 2,000,000 EV Annual Production Rate | Unsure | End of 2026 |
Unfortunately, there is plenty of bad news. Ford’s EV unit’s operating loss soared to US$1.1 billion in 2Q 2023, much higher than the US$700 million in the March 2023 quarter despite selling almost triple the number of units quarter to quarter.
Phrased differently, Ford incurred a remarkable — and obviously unsustainable — US$32,400 operating loss on every EV it sold to its dealers in 2Q 2023. Its operating margin on those sales was negative 57%.
Due to the disappointing EV financial results in 2Q 2023, Ford now expects full-year 2023 EV operating losses to reach US$4.5 billion, a much wider loss than the US$3 billion management projected just three months ago. Furthermore, Ford pushed out the time frame it expects to reach a 600,000 unit annual production rate to “sometime in 2024.” The company previously planned to achieve this pace by year-end 2023.
Longer term, Ford believes it will produce EVs at a two million-unit annual pace, but the company is now unwilling to predict when this will occur. Previously, that target rate was to be reached by the end of 2026. Similarly, management thinks its EV unit will eventually post a positive 8% operating margin, but the date that could be achieved is now unclear. For the last several months the company was confident an 8% margin would be realized in 2026.
Ford’s disappointing EV results probably do not fall into the category as extremely surprising news. Most investors and analysts acknowledge it takes time to reach a production rate that translates into profitability, but the magnitude of the operating losses (US$4.5 billion likely in 2023 alone), as well as a longer path to acceptable returns, must be considered disappointing.
Ford Motor Company last traded at US$13.26 on the NYSE.
Information for this story was found via Edgar and the sources mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
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