Ford's electric dreams meet harsh reality as Q2 earnings reveal huge EV losses

25 July 2024

The American automotive giant Ford has unveiled its Q2 2024 financial results, painting quite a contrasting picture of ambition and challenges. While Ford's overall revenue surpassed expectations, reaching $47.81 billion, driven in part by a 6% increase in auto revenue, the company's earnings per share fell short of projections, coming in at $0.47 compared to the anticipated $0.64.

This sizable miss was largely attributed to the escalating losses in Ford's electric vehicle division, Model e. Despite strong sales growth across its EV lineup, including the F-150 Lightning, Mustang Mach-E, and E-Transit, the unit reported a staggering $1.1 billion loss for the quarter, bringing the total EV losses for the first half of 2024 close to $2.5 billion.

Ford attributed these losses to a combination of factors, including "industry-wide pricing pressure" and lower production volumes. This comes at a time when Ford has been scaling back on several EV initiatives, including cutting F-150 Lightning production and postponing around $12 billion in EV spending, citing "slower-than-expected" demand.

In contrast, Ford's traditional internal combustion engine business, Ford Blue, saw modest growth in both volume and revenue, up 3% and 7%, respectively. Ford's commercial and software unit, Ford Pro, continued to be a bright spot, posting a 9% increase in revenue and a robust EBIT margin of 15.1%.

The company's CEO, Jim Farley, acknowledged the challenges in the EV market, emphasizing the need for a shift in strategy. On the company's earnings call, Farley revealed Ford's new focus on smaller, more profitable EVs, highlighting the growing competition from Tesla and emerging low-cost manufacturers from China.

To achieve profitability in the EV sector, Ford is banking on a new EV platform being developed by a "skunkworks" team in Long Beach. This platform is seen as key to Ford's revised EV strategy, which prioritizes profitability over volume. Farley hinted at potential partnerships in the EV space, promising more details in the near future.

Despite the setbacks in the EV division, Ford maintained its full-year EBIT guidance of $10 to $12 billion and raised adjusted free cash flow expectations to $7.5 to $8.5 billion. The company also acknowledged the ongoing challenges in the EV market, forecasting losses of $5.0 to $5.5 billion for its Model e unit in 2024.

Ford's Q2 earnings report reveals a company navigating a complex transition and while it continues to see success in its traditional ICE business and its commercial unit, the path to profitability in the EV sector remains full of challenges. Ford's new revised strategy, focused on smaller, more profitable EVs and potential partnerships, offers a glimpse into the company's vision for the future. Will this strategy help Ford to overcome the current hurdles and achieve sustainable profitability? Time, as always, is on our side. All we have to do is wait for the answers.

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