Title: Ford's Electric Vehicle Unit Reports $1.3 Billion Loss in Q1

In a recent announcement, Ford's electric vehicle unit revealed a staggering loss of $1.3 billion in the first quarter of the year. This translates to approximately $132,000 per vehicle sold, as the company experienced a decline in earnings overall. Ford's decision to shift towards electric vehicles (EVs) aligns with industry trends, but the results signify the mounting profit pressures faced by the EV business.

The EV unit, known as Model e, reported a sale of 10,000 vehicles in the quarter, a 20% decrease compared to the previous year. Moreover, revenue plummeted by a significant 84% to around $100 million. This sharp decline was largely attributed to price cuts for EVs across the industry. The result was a massive loss of $1.3 billion before interest and taxes (EBIT), leading to a substantial per-vehicle loss in the Model e unit.

Ford CFO John Lawler noted that a prolonged price war in the EV market has made profitability exceedingly challenging. Despite successfully reducing costs by approximately $5,000 for each Mustang Mach-E, the decline in revenue has outpaced the cost reductions.

In 2023, Ford Model e reported a full-year EBIT loss of $4.7 billion on 116,000 EV sales, averaging out to $40,525 per vehicle, which represents just over a third of the first-quarter loss. It is important to note that Model e does not account for all Ford's EV sales, as some are sold through its Ford Pro unit, catering to fleet sales for businesses and government buyers. Notably, Ford highlighted strong demand in this unit, including significant orders from the US Postal Service for 9,250 E-Transit vans, as well as over 1,000 F-150 Lightning pickups and Mustang Mach-E SUVs from Ecolab, a global sustainability company.

Despite the challenging financial landscape for the EV business, Ford CEO Jim Farley expressed confidence during an investor call that the company is making strategic changes to its EV operations. Farley asserted that Ford's upcoming generation of EVs will allow it to achieve profitability in the near future.

In terms of earnings, Ford enjoyed robust profits from its Ford Pro unit, primarily selling traditional internal combustion vehicles. The unit posted an impressive EBIT of $3 billion, more than double its earnings from a year ago. Revenue from Ford Pro also rose by 36% to $18 billion, accompanied by a 21% increase in vehicle sales, totaling 409,000 units.

On the other hand, Ford Blue, responsible for sales of gasoline-powered cars to consumers, witnessed a decline in sales and revenue. Sales fell by 11% to 626,000 vehicles, resulting in a 13% drop in revenue to $21 billion. Consequently, EBIT in the traditional sales segment fell by nearly two-thirds to $905 million.

Combined, Ford Blue and Ford Pro generated profits at a level similar to the previous year. However, the mounting losses in the Model e unit contributed to an overall net income decrease of 20% to $1.3 billion. Despite this decline, adjusted earnings per share amounted to 49 cents, surpassing analyst forecasts of 44 cents per share.

Ford's main competitor, General Motors, recently announced that it remains on track to turn a profit from its North American EV business in the second half of this year. Similarly, Stellantis, known for producing vehicles under brands such as Jeep, Ram, Dodge, and Chrysler, reported that its European EV business was already profitable last year. Conversely, Tesla, the leading EV manufacturer worldwide, experienced a 48% drop in adjusted earnings and a 9% decline in revenue during the first quarter, marking its first year-over-year sales decrease since the pandemic hit.

Despite the challenging financial landscape for Ford's EV unit, the company remains optimistic about the future. With strategic changes in the pipeline and a new generation of EVs on the horizon, the automaker aims to position itself for profitability in the EV market in the coming years.