Elon Musk, the tech tycoon known for his candid commentary on Twitter, has made a surprising move by coming to the defense of an unlikely ally: Ford. In a recent tweet, Musk praised the iconic American automaker, sending shockwaves through the auto industry and leaving everyone wondering what’s behind this unexpected show of support. Could there be more to this story than meets the eye? Let’s find out.
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Ford, the venerable American automaker, has reported a staggering $1.8 billion profit in the latest quarter, igniting a surge of optimism within the industry. This remarkable financial achievement comes as a breath of fresh air for Ford, especially considering the challenges faced in the previous year due to parts shortages that hindered production and sales.
It’s important to note that Ford’s loss of $3.1 billion in the corresponding period a year ago was primarily due to the decline in the value of its stake in Rivian, an electric-vehicle maker. Ford had invested in Rivian, which may have been seen as a promising venture at the time. However, the decline in Rivian’s value negatively impacted Ford’s financials. It’s crucial to highlight that Ford’s investment in Rivian reflects the company’s interest in the growing electric vehicle market.
Another significant challenge faced by Ford in 2022 was supply chain shortages. Ford’s production was hindered by shortages of computer chips and other essential components. These shortages affected the automotive industry as a whole and resulted in lower production volumes for many automakers. The scarcity of computer chips was primarily caused by disruptions in the global supply chain, which were worsened by the COVID-19 pandemic. The shortage of key parts prevented Ford from manufacturing vehicles at the expected capacity, impacting their revenue and profitability.
Overcoming the obstacles that plagued the industry, the automaker showcased its resilience and determination. The increased sales figures bear testament to Ford’s ability to adapt and thrive in the face of adversity.
During a conference call with analysts, Ford’s CEO Jim Farley, expressed his satisfaction with the company’s performance, stating that it was solid when examining the core operations and financial quarter. He highlighted that growth was observed in all essential indicators and that the company’s balance sheet remained robust.
The company’s revenue for the first quarter of the year was $41.5 billion, which is a 20% increase from the same period in the previous year, where they had generated $34.5 billion in revenue. This increase in revenue could be attributed to higher sales of their cars and trucks globally.
Ford’s global sales for the first quarter of the year were 1.1 million, which is an increase from the sales figure of 966,000 for the same period in the previous year.
Ford has been trying to streamline its operations and cut costs. Despite the positive revenue growth, Ford reiterated its forecast of $9 billion to $11 billion in profit for the full year before interest and taxes.
In addition, Ford reported separate results for its electric vehicle division for the first time. The EV business reported a staggering loss of $700 million before interest and taxes in the first quarter. This loss could be attributed to the high costs involved in developing and producing electric vehicles.
Ford Model E
Ford Model E, a division of Ford Motor Company, focuses on the development and production of electric vehicles. The division was created to support Ford’s priority in the coming years, which is to accelerate the shift to electric vehicles. The Model E division is responsible for the design, engineering, and production of Ford’s electric vehicles.
In 2020, Ford announced that it would spend $11.5 billion on electric vehicles through 2022, and in May 2021, the company increased its investment to $30 billion through 2025. However, in September 2021, Ford announced that it would be increasing its investment in electric vehicles to $50 billion between 2022 and 2026. This significant increase in investment is a clear indication of Ford’s commitment to electric vehicles.
Ford Mustang Mach-E
The Ford Mustang Mach-E is an electric SUV that was introduced in 2020. It is based on the popular Mustang sports car and is designed to offer an electric alternative to SUV buyers. The Mustang Mach-E has a range of up to 300 miles on a single charge and features advanced technology and connectivity options.
F-150 Lightning
The F-150 Lightning is an electric version of Ford’s best-selling F-150 pickup truck. It was introduced in 2021 and is designed to offer the same capability and performance as the gasoline-powered F-150 but with the added benefits of electric power. The F-150 Lightning has a range of up to 300 miles on a single charge and can tow up to 4,500 kg or 10,000 lbs.
When production of the F-150 Lightning began, it had already received over 150,000 orders, indicating a strong potential for commercial success. However, despite the competition from Chinese automaker BYD, Ford’s first-quarter results demonstrate that they are still far from reaching their goal of surpassing Tesla as the top seller of electric vehicles globally.
Additionally, the earnings before interest and taxes margin, or EBIT, which gives investors insight into the actual costs of the business, showed a negative value of -102.1%, more than double the previous quarter’s margin of -40.4%. Therefore, Ford is facing considerable financial challenges in the electric vehicle market.
Electric Vehicle Revenue
In the first quarter of this year, electric vehicle sales generated $700 million in revenue, which is less than half the $1.6 billion in revenue that the Ford Model E generated in the last quarter of 2022. However, it’s notable that Ford only sold 12,000 electric vehicles in the first quarter, resulting in a loss of $58,333 for each electric car sold during this period. Ford attributed its poor performance to higher costs, including engineering and spending-related expenses, as well as inflationary pressures. Additionally, the weak sales volume was due to scheduled downtime at the Cuautitlan assembly plant in Mexico, where they were increasing the Mach-E production capacity to 35 jobs per hour.
While Ford’s struggles in the transition to battery-powered vehicles may delight its competitor Tesla, surprisingly, Elon Musk, Tesla’s CEO, has expressed support for Ford despite being rivals in the electric vehicle segment. This is noteworthy given that General Motors is also currently transitioning to BEVs.
Musk is speaking in support of Ford on Twitter, urging people to be less critical of Ford and understand that implementing a radical transformation involving a shift in technology is challenging. He even praised Ford’s electric vehicle strategy and complimented the F-150 Lightning.
Musk’s defense of Ford came after a Twitter user criticized the company’s negative net income margin for EVs, while Tesla’s was positive. Rather than criticize or ridicule Ford, Musk came to their defense and acknowledged that it’s always challenging to establish new vehicle lines with major technology shifts.
During a period of intense competition between Tesla and Ford, Elon Musk expressed admiration for Ford while Tesla lowered its prices multiple times this year, including on the Model Y, which directly competes with Ford’s Mustang Mach-E. In response, Ford reduced the prices of the Mach-E by up to 8% on Tuesday, the second price cut they have announced this year. Ford’s CEO, Farley, acknowledged the importance of staying competitive but expressed concern about the negative impact of continuous price cuts on resale value. He indicated that while Ford will match Tesla’s price cuts, there is a limit to how much they will lower their prices.
Tesla plans to release its first-ever pickup truck, the Cybertruck, at the end of the third quarter in an effort to rival the F-150 Lightning. When asked if the recent price reductions were intended to eliminate competition, Musk responded on April 19, stating that Tesla wants all-electric vehicles to succeed. Musk further explained that Tesla has made its patents available for free and has opened up its supercharger network to help competitors, rather than trying to destroy them. Tesla aims to assist its competitors in any way possible.
Will Ford reach its goal of surpassing Tesla as the top seller of electric vehicles globally? What do you think?