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Ford’s Mustang Mach-E profit wiped out by commodity costs

16 June 2022 - 09:08 By Keith Naughton
Ford's hot-selling Mustang Mach-E electric SUV and other plug-in models are being rendered unprofitable by rising raw material costs.
Ford's hot-selling Mustang Mach-E electric SUV and other plug-in models are being rendered unprofitable by rising raw material costs.
Image: Supplied

Ford’s hot-selling Mustang Mach-E electric SUV and other plug-in models are being rendered unprofitable by rising raw material costs. 

“We actually had a positive bottom line profit when we launched the Mach-E, commodity costs have wiped that out,” CFO John Lawler said on Wednesday at the Deutsche Bank Global Automotive Conference, referring to 2020 when the vehicle went on sale.

“You’re going to see pressure on the bottom line when we launch our EVs, they’re not going to be positive.”

Even so, Ford sees “a lot of opportunity” to take costs out of the Mach-E and other EVs, such as a future mid-size SUV, Lawler said. The company has said it’s re-engineering the vehicle on the fly to improve its margins. 

The company also has boosted prices on the Mach-E this year without giving specifics. But the model, which Ford is recalling for a defect that could cause it to stop running, now costs $25,000 (about R395,921) more to produce than an equivalent petrol-powered Edge SUV, he said.

“We are working back to contribution-margin positive across all of our EVs.”

Ford is in the midst of launching the F-150 Lightning plug-in pickup and is spending $50bn (about R791,842,500,000) to roll out more EVs, with plans to build 2-million annually by 2026. For now, the company’s traditional internal combustion engine vehicles, such as the Bronco SUV, are underwriting its new electric models. Lawler said the company’s goal was to make money on its EVs “as we’re scaling and we’re launching these vehicles”.

Ford’s top financial executive added the company is seeing an increase in car loan delinquencies amid rising inflation and higher interest rates. Loan defaults had been “very low” last year and now could be returning to pre-pandemic levels.

“We’re looking for every indication and every data point we can to get a read on where the consumer is, where they’re headed, given everything we see out there, the inflationary pressures, the economic issues. We are seeing some headwinds there a little bit when it comes to delinquencies as maybe a leading indicator.”

Ford’s shares rose less than 1% at 1 pm in New York.

More stories like this are available on bloomberg.com


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