Ford Surges in EV Sales but Misses Earnings Expectations, Adjusts Future EV Strategies
Ford Motor Company’s second quarter of 2024 financial results have revealed a mixed bag of achievements and setbacks, prompting nuanced reactions from the market and stakeholders. Despite surpassing revenue expectations with a notably high increase in Electric Vehicle (EV) sales, the company’s earnings per share fell short of forecasts, reflecting the complexities of transitioning to a more sustainable vehicle lineup amidst fierce competition.
In Q2, Ford reported an auto revenue of $44.8 billion, marking a 6% increase from the previous year and beating expectations by over $3 billion. The overall revenue, when accounting for Ford’s finance unit, reached $47.81 billion. However, the earnings per share stood at $0.47, below the anticipated $0.64, while net income touched $1.8 billion. The Earnings Before Interest and Taxes (EBIT) also highlighted challenges, showing a 27% decline from the previous year at $2.67 billion.
Electric vehicles showed promising growth with 23,957 units sold in the quarter, witnessing significant increases across models such as the F-150 Lightning, Mustang Mach-E, and E-Transit. Despite these gains, Ford’s performance in the EV segment also reflected some financial strains, with the Model e unit reporting a loss of $1.1 billion for the quarter, contributing to a cumulative half-year loss of $2.5 billion.
Ford Pro, the company’s commercial and software unit, however, painted a more optimistic picture, showing a 9% growth in revenue to $17 billion and an impressive 15.1% EBIT margin. The rise in software subscriptions by 35% and a doubling in mobile repair orders underscored Ford’s successful penetration into digital and service-based offerings.
Reflecting on the competitive landscape, Ford’s CEO Jim Farley highlighted the ongoing rivalry with Tesla and cost-efficient Chinese manufacturers. “The main competition is Tesla and low-cost competitors from China,” Farley stated, emphasizing the strategic importance of a new platform being developed by a specialized team in Long Beach. This platform is pivotal to Ford’s revamped and realistic EV strategy, as Farley noted, “The platform is central to Ford’s ‘more realistic and sharpened’ EV plan to drive profits. The company will not release unprofitable EVs as the company works toward break even.”
Farley also discussed the automotive industry’s shift towards EVs, particularly among commercial customers. “It’s common for commercial customers to adopt new tech, including connected and EVs, before individuals,” he explained. This trend aligns with Ford’s focus on nurturing its commercial business, software, and smaller EVs as principal growth drivers, especially in potentially worsening economic conditions.
Despite these strategic efforts, Ford’s stock took a significant hit, sliding over 11% in after-hours trading following the earnings announcement. Observers like BF from the financial forums pointed out that the EV losses, though substantial, were not the sole reason for the downturn. “High warranty costs are a major factor influencing margins,” BF commented, shedding light on other underlying challenges affecting the company’s profitability.
Looking ahead, Ford’s full-year EBIT guidance remains steady between $10 to $12 billion, with an adjusted free cash flow expectation raised by $1 billion to range from $7.5 to $8.5 billion. The upcoming earnings call scheduled for 5 PM on the announcement day is poised to provide further insights into Ford’s strategies and expectations for the remainder of the year. As the automotive landscape evolves, Ford’s commitment to adapting and competing in this dynamic market continues to be tested.