Demand is higher than ever, but rising costs are hurting Ford's bottom line.
As chip shortages, supply chain issues, and the war between Russia and Ukraine wreak havoc on the automotive industry, manufacturers have had to increase vehicle prices at an astronomical rate. No type of automobile has been affected greater than the EV, no doubt due to its heavy reliance on semiconductor chips to function. But while Tesla has increased prices multiple times in recent months, some manufacturers have retained the affordability of their models. One such manufacturer is Ford with the Mustang Mach-E. But now it's emerged that Ford is no longer turning a profit on the Mach-E, despite slight inflation-related price increases, as rising production costs mean that in keeping its mainstream EV affordable, the Blue Oval is potentially taking a hit on every car it produces.
This comes via CNBC News, which reported on comments made by Ford CFO, John Lawler at a conference hosted by Deutsche Bank. Lawler said that while demand hasn't yet dropped off - which is a good sign for the EV industry - rising commodity costs have reduced Ford's expected profit margins to almost nil.
Price increases on Ford's products have seen the brand retain its broader profit margins, but it means that other mainstream models, and particularly combustion models and bread-and-butter sellers like the Ford F-150, are carrying the brand's transition to EVs. The Mach-E was highly profitable for the brand in late 2020 when it had just launched, but Lawler says that is no longer the case, as higher battery material costs, in particular, have had a drastic effect on profitability.
This isn't the only battery-related news for the Mach-E of late, as nearly 50,000 units are being recalled for a battery-related issue.
While demand remains high, Lawler also spoke on how Ford is expecting an economic downturn and preparing accordingly. He points towards a higher frequency of late payments from buyers to Ford Credit as a potential sign of a recession on the horizon. "As an industry and as a company, we're heading into this [possible recession] in a much different position than we've ever been in before," he said, highlighting that in previous instances of recession, available supply far outweighed demand. This isn't the case now, as he says Ford has "an order bank that's significant at over 300,000 units" while struggling to keep up with the demand.