Ford's electric vehicle division faced significant losses in the first quarter, reporting a staggering $1.3 billion loss, equivalent to $132,000 per vehicle sold. Despite the company's transition towards electric vehicles (EVs), these losses highlight the challenges in the EV business.
The division, known as Model e, sold 10,000 vehicles in the quarter, down 20% from the previous year, with revenue plummeting by 84% to approximately $100 million. This sharp decline in revenue was attributed mainly to industry-wide price cuts for EVs. Consequently, the division incurred substantial losses, including expenses for research and development of future EV models.
Ford anticipates further losses, projecting Model e to incur EBIT losses of $5 billion for the full year. The company aims to achieve EV pricing that covers manufacturing costs within the next 12 months, but fierce price competition in the EV market has made profitability challenging.
Although Ford's Ford Pro unit, which handles fleet sales, experienced strong demand for EVs, particularly from corporate customers like the US Postal Service and Ecolab, the losses from Model e overshadowed its success. Ford Pro contributed significantly to the company's overall profits, while Ford Blue, responsible for consumer sales of gasoline-powered cars, reported a decline in sales and revenue.
Despite these setbacks, Ford's CEO Jim Farley expressed confidence in the company's future EV endeavors, expecting profitability in the near term with its next generation of EVs. However, Ford's overall net income fell by 20% due to the losses in the EV division, highlighting the financial impact of its EV transition compared to rivals like General Motors and Stellantis.
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