Ford is losing $50k per EV - but its profits have plunged for another worrying reason
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Shares of Ford tumbled Thursday after the automaker's profits badly missed Wall Street's expectations.
A major reason for this was that it spent more than $2 billion in just three months fixing customers' cars and trucks.
Another is that it loses nearly $50,000 on every electric vehicle it sells - since they cost more to produce.
The vast losses on EVs and big bills to repair repeatedly faulty new cars landed a one-two blow to the profits of the US’s second largest automaker.
Late Wednesday Ford reported profits for the April to June quarter that were well down on estimates.
A motorist puts an electric 2024 Ford Mustang Mach-E through its paces on a test track at the Electrify Expo in The Yards Sunday, July 14, 2024, in north Denver
Warranty costs have vexed the nation's second-largest automaker for several years and lopped billions off of its profits.
In the second quarter, warranty and recall costs totaled $2.3 billion. That is $800 million more than the first quarter and $700 million more than a year ago.
Shares of Ford were tumbling Thursday after the automaker's profits badly missed Wall Street's expectations.
Analysts at Piper Sandler cited these 'unwelcome warranty headwinds' as the reason for the stock slump.
'Ford referenced quality problems on vehicles from the 2016 and 2021 model years, and to address these concerns, the company is shouldering a higher-than-expected warranty burden,' they said.
Meanwhile, Ryan Brinkman of JPMorgan said in an analyst note that the weaker-than-expected quarterly profit was surprising, particularly when General Motors reported a strong performance a day earlier.
Brinkman outpointed that warranty costs were the culprit at Ford, which were above his expectation for flat to lower costs sequentially.
The loss of $50,000 per electric truck and car was first reported by industry expert Robert Bryce in his Substack newsletter. Ford E, the electric division, lost $2.5billion in the first six months of this year as price wars with rivals added to losses.
Ford had already cut back on production of some EVs, such as the F-150 Lightning truck.
Shares slid nearly 18 percent by 3.30pm in New York - wiping billions of dollars from its market value.
The price gap between used EVs and gas cars is growing amid demand pullback
Americans are not rushing to buy EVs 0 new or old. A recent report showed that secondhand electric cars are now cheaper than their gas counterparts for the first time - and the gap is widening quickly.
The study from comparison site iSeeCars found the cost of an average used EV dropped $265 below a typical gas car in February.
This marked the beginning of the trend - and the price gap has grown to $2,657 as May.
While this price drop may be good news for Americans looking for a cheaper switch to an EV, the price crash is yet another sign of dwindling US demand for the cars.
