Ford postpones $12bn in EV investments due to weak demand
Ford is postponing around $12 billion in scheduled investments for electric vehicles (EVs), including the development of a second battery factory in Kentucky, due to declining demand for premium EVs. During its Q3 earnings call, CFO John Lawler emphasized that Ford is not abandoning its commitment to next-generation EVs. However, he and CEO Jim Farley recognized that while EV sales have increased, customers are not yet willing to pay a premium for an EV over a petrol-powered or hybrid vehicle.
Ford's Model e unit reports $1.3bn loss in Q3
The company's Model e unit, which focuses on EVs, reported a $1.3 billion loss in Q3, up from the $1.08 billion loss in Q2. Ford ultimately aims to achieve an 8% margin on EVs by establishing a cost structure that reflects price parity with ICE vehicles. Farley stated that lowering the price tag on electric vehicles is a top priority in order to keep pace with the "moving target" of the EV market.
We have to be totally competitive on cost: CEO
"Great product is not enough in the EV business anymore," Farley stressed. "We have to be totally competitive on cost." In October, Ford unveiled the F-150 Lightning Flash pickup, an affordable, technology-rich version of the F-150 Lightning. The company also intends to launch several second and third-generation vehicles, including a new full-sized pickup truck, at more competitive price points.
Ford's Q3 2023 financials
Ford posted a net income of $1.2 billion in Q3, compared to an $827 million loss in the previous year. The company's ICE business operations, Ford Blue, generated $1.72 billion in the quarter, while the Ford Pro commercial business contributed $1.65 billion. The automaker closed out the quarter with cash flow from operations of $4.6 billion and adjusted free cash flow of $1.2 billion. Ford's shares settled at $11.35 apiece on Thursday and fell over 4% in the after-hours session.
UAW strike cost Ford $100 million
Ford and United Auto Workers union negotiators have reached a preliminary agreement to conclude the six-week strike. The strike had an EBIT impact of about $100 million in the third quarter and reduced the automaker's production plan by around 80,000 units. "This would reduce 2023 EBIT by roughly $1.3 billion," said Lawler. Ford didn't provide any updates on its full-year guidance due to the strike, but it plans to do so after the agreement is ratified.
