Making electric vehicles (EVs) isn’t easy. Even for legacy automaker Ford (NYSE:F), which has been around since 1903.
According to The Telegraph, Ford’s electric vehicle division — called Ford Model e — lost about $47,600 for every EV it sold during the second quarter. The division lost $1.14 billion while selling 23,957 EVs. Ford’s EVs include the F-150 Lightning, Mustang Mach-E and E-Transit van.
EVs are more expensive to produce than internal combustion engine (ICE) vehicles, mainly due to costly batteries. It also doesn’t help that the industry has witnessed a price war this year as demand for hybrids has picked up.
China has also emerged as a source of lower-priced EVs due to government subsidies. At the same time, China’s EV exports have steadily grown since 2020.
“Ford may face increased price competition or a reduction in demand for its products resulting from industry excess capacity, currency fluctuations, competitive actions, or other factors, particularly for electric vehicles,” warned the company.
F Stock: Ford Continues to Lose Money on EVs
During Q2, Ford posted automotive revenue of $44.81 billion, beating the analyst estimate for $44.02 billion. On the other hand, its adjusted EPS of 47 cents fell short of the estimate for 68 cents.
F stock is also falling today due to warranty reserves. Still, Ford remains optimistic for lower future warranty costs as it works to improve the quality of its vehicles.
As for guidance, the company expects Ford Model e to lose between $5 billion and $5.5 billion for 2024 due to price competition development investments. Overall adjusted EBIT is expected to remain between $10 billion and $12 billion while adjusted free cash flow is now expected to be between $7.5 billion and $8.5 billion, an increase of $1 billion.
Following earnings, several analysts lowered their price targets. Citi analyst Itay Michaeli lowered his price target to $17 from $18, citing warranty costs as a major disappointment. However, Michaeli believes that Ford will be able to get these costs under control.
Meanwhile, Goldman Sachs lowered its target to $12 from $14 while UBS dropped its target to $13 from $14.
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
