Ford’s profits rose due to strong demand for trucks, but the outlook for electric vehicles weighed negatively

(Reuters) – Ford Motor Co. (FN) on Tuesday reported solid first-quarter revenue and earnings thanks to strong demand for its trucks and SUVs, but issued a measured full-year forecast tempered by continuing losses in its electric vehicle unit. .

In a recent briefing, Ford CEO Jim Farley said he hopes the company can become “boringly predictable” in meeting investors’ expectations. Farley said earlier this year that Ford missed Wall Street’s estimates for the fourth quarter, leaving $2 billion on the table.

Farley also said that Ford has no intention of pursuing EV sales volume “at any cost” — after the automaker earlier today cut prices for the Mustang Mach E for the second time this year.

Farley’s position contrasts sharply with that of Tesla Inc (TSLA.O) CEO Elon Musk, who said last month that the electric vehicle maker could cut profit margins on car sales to zero and make up the difference through sales of software-enabled services. However, Tesla has the advantage of earning higher profit margins from its electric cars than Ford and other legacy automakers across their entire portfolios.

Faced with lower demand for its products in China, Farley said, Ford will restructure its operations there to operate with less investment, and “double up” its auto business there, including electric vehicles. He added that Ford’s joint venture with Chinese automaker JMC Corp (5704.T) could become an export hub for electric commercial vehicles and low-cost combustion vehicles.

Ford easily beat analyst expectations for first-quarter EBIT, reporting EBIT of $3.4 billion, compared to the consensus of $2.4 billion.

The automaker reaffirmed full-year adjusted earnings guidance of $9 billion to $11 billion. Those numbers include a projected $3 billion loss in Ford’s electric vehicle unit, the Model e.

Shares fell 2% in after-hours trading.

Although US auto sales in April were much stronger than expected, Ford warned that “top industry customer incentives such as rebalancing vehicle supply and demand” will be a “headwind” to profitability.

Aggressive movements

The company announced for the first time the financial results of its Ford Blue, Ford Pro and Ford Model e units. Ford Blue’s EBIT nearly doubled to $2.56 billion, a margin of 10.4%, and Ford Pro EBIT nearly tripled to $1.4 billion, a margin of 10.3%.

Ford’s gross EBIT margin was 8.1%, after accounting for losses from the Model e.

For 2023, the automaker expects full-year EBIT for Ford Blue to rise slightly to $7 billion, while Ford Pro EBIT could nearly double, to nearly $6 billion.

Ford lost more than $60,000 for every electric vehicle sold in the first quarter. The combustion vehicle, Ford Blue, averaged $3,715 per vehicle, while the Ford Pro business earned $4,053 per vehicle, based on company financials.

In a briefing, Chief Financial Officer John Lawler said the company is on track to have its electric vehicles eBIT positive by the end of 2024. Ford expects the unit to post an EBIT margin of 8% by the end of 2024. 2026, Farley’s target CEO called “quite realistic” given the company’s “aggressive” moves to offset the cost of next-generation electric vehicles.

Demand for the Ford F-150 Lightning electric vehicle is “really, really strong,” Farley said. Ford is committed to plans to increase production of the Lightning by 150,000 vehicles annually by the end of this year.

In the meantime, the company expects continued pricing pressure on Ford Blue combustion models, while Ford Pro commercial vehicles will retain some pricing power.

Ford’s first-quarter profit was $1.8 billion, or 44 cents per share, compared to a loss of $3.1 billion, or 78 cents per share, a year ago. Adjusted earnings per share were 63 cents, compared to 38 cents a year ago. Analysts expected 41 cents.

The Dearborn, Michigan-based company reported revenue of $41.5 billion for the quarter ending in March, compared to $34.5 billion a year ago.

Reporting by Nathan Gomez in Bengaluru

Our Standards: The Thomson Reuters Trust Principles.

Joseph White

Thomson Reuters

Joe White is the global automotive correspondent for Reuters, based in Detroit. Joe covers a wide range of automotive and transportation industry topics, and writes The Auto File, a thrice weekly newsletter about the global auto industry. Joe joined Reuters in January 2015 as Transportation Editor leading coverage of Planes, Trains and Automobiles, later becoming Global Automotive Editor. He previously served as the Wall Street Journal’s Global Automotive Editor, where he oversaw coverage of the auto industry and ran the Detroit bureau. Joe co-authored (with Paul Ingracia) The Comeback: The Fall and Rise of the American Auto Industry, and he and Paul shared the Pulitzer Prize for Cadence Reporting in 1993.

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