Ford Motor Co. is working on low-cost small electric vehicles to stem the loss of electric vehicles and compete with Tesla Inc. and Chinese automakers.
CEO Jim Farley revealed those plans to analysts on Tuesday after the automaker announced adjusted earnings per share of 29 cents, more than double analysts’ average expectations of 13 cents. Fourth-quarter revenue of $46 billion beat analysts’ expectations of $40.3 billion.
Ford is rethinking its electric vehicle strategy to move away from large, expensive electric vehicles because high prices are the biggest barrier to persuading mass car buyers to switch to electric vehicles, Farley said.
“We are also adjusting our capital by shifting more focus to smaller electric vehicles,” Farley told analysts on a conference call. He said Ford “made a silent bet two years ago” to build a team to build a low-cost EV platform.
A small team is led by Alan Clarkexecutive director of advanced electric vehicle development, who joined Ford two years ago after more than 12 years developing models for Tesla.
The new electric vehicle platform will underpin “multiple vehicle types” and should be profitable, Farley said. Ford’s current battery-powered models lost $4.7 billion last year, and losses are projected to rise to $5.5 billion this year.
“We are nowhere near our potential revenue,” Farley said. “All of our EV teams are relentlessly focused on the cost and efficiency of our EVs because the ultimate competition will be affordable Tesla EVs and Chinese models.
How Electric vehicle sales are slowingFarley tries to thread a needle between downscaling company spending on electric vehicles $12 billion while increasing production of traditional internal combustion engine models that generate the profits needed to finance future growth. Play video
For the current year, Ford forecast earnings of $10 billion to $12 billion before interest and taxes, up from $10.4 billion on that basis in 2023. predicted in November, when he lowered his forecast after six week strike United Auto Workers Union.
As part of this initiative to generate more profits, the automaker plans to cut costs by $2 billion, focusing on areas such as materials, transportation and manufacturing operations.
Read more: Ford ditches automated parallel parking feature to cut costs
“We expect the stock to trade higher” on better-than-expected quarterly results and upbeat full-year guidance, Wells Fargo said in a research note written by analysts led by Colin Langan.
Ford shares were up 5.5% at 9:39 a.m. in New York. By Tuesday’s close, shares were down 1% from the same period last year.
The automaker is paying investors an additional dividend of 18 cents per share, on top of the regular quarterly dividend of 15 cents payable on March 1 to shareholders of record on February 16.
EV Grief
In December, the automaker production halved electric pickups F-150 Lightning, and promotion release of its highly profitable Bronco SUVs and Ranger pickups.
Chief Financial Officer John Lawler told analysts the company no longer expected to meet its targets. Target margin 8% on electric vehicles by 2026.
Ford’s electric vehicle shortage in 2023 resulted in a loss of about $28,000 on every battery-powered model sold, according to an analysis by Bloomberg Intelligence analyst Joel Lewington. He noted that these losses are “unsustainable.”
The bright spot is the gas-electric hybrid vehicles that Ford offers. turned in response to strong consumer demand. Farley said he expects sales of hybrid models to rise 40% this year, compared with last year’s 25% jump in sales of these powertrains.
UAW Contract
The Dearborn, Michigan-based automaker also faces higher labor costs than rival General Motors Co., which is based in Dearborn, Michigan. amazed Last week, Wall Street forecast 2024 earnings before interest and taxes of between $12 billion and $14 billion. GM said the contract it has with the UAW will increase vehicle costs by about $575, while Ford projects an increase of up to US$900 per vehicle due to record deal which increases workers’ wages by 33% more than four and a half years.
“GM is better positioned to absorb these labor costs because they already have a healthier cost base in North America,” said David Whiston, an analyst at Morningstar Inc. in Chicago, in an interview before Ford released the results. “And Ford has more UAW employees in the U.S. than GM.”
In its traditional internal combustion engine business, known as Ford Blue, the company earned $813 million before interest and taxes in the fourth quarter, less than the $866.5 million analysts expected. Ford’s U.S. sales rose less than 1% in the fourth quarter as the UAW strike cost the company production of high-margin models such as the F-Series. Super debt pickup and Researcher SUV.
In its commercial business, known as Ford Pro, the automaker earned $1.81 billion before interest and taxes, more than the $1.43 billion analysts expected. Bloomberg Intelligence predicts Ford Pro will see margins are expanding this year, while its Ford Blue unit will come under pressure on profits from falling prices as dealers restock their lots after pandemic-related shortages.
“Ford’s profitability hangs in the balance as the transition to electric vehicles takes longer than expected and requires right sizing to cut EV losses while managing growing price competition for Ford Blue,” BI analysts Steve Man and Peter Lau wrote in a note. from February 2. . “Our scenario assumes that U.S. electric vehicle sales will grow 9% this year after compound annual growth of 65% over the past three years.”