Ford (NYSE: F) has shaved off nearly 14% of its value in July in a sign that it might need to stick closer to its knitting. After pouring tens of billions of dollars in capex into its electric vehicle (EV) division, the automaker has revealed that its Ford Model “e” experienced an EBIT loss of $1.1 billion in Q2, translating to roughly $50,000 for each of the nearly 24,000 EVs sold in the U.S. during the period. While this performance is slightly better than Q1 when Model e lost $1.3 billion, it still marks a wide chasm between its early vision and reality.
Ford blames a one-two punch of pricing pressure on first-gen EVs and lower wholesales despite lowering Model e costs by approximately $400 million. While EV demand has softened industrywide, that is little solace to investors, especially those who are in it for the 5% dividend yield. After losing $2.5 billion in its EV division this year, Ford is showing no signs of a reversal, forecasting a full-year loss in the range of $5 billion-$5.5 billion for Ford Model e as it continues to fight headwinds like pricing pressure coupled with the need to invest in next-gen EVs that might better appeal to consumers.
EV Money Pit
In Q4 2023, Ford sidelined plans to pour $12 billion into its EV ambitions after realizing that customer demand still paled in comparison to that of internal-combustion engines and hybrid vehicles. Ford CFO John Lawler reportedly stated, “We’re not moving away from our second generation [EVs]. We are, though, looking at the pace of capacity that we’re putting in place. We are going to push out some of that investment.” However, Ford will continue to direct capex into next-gen EVs — only slowing the pace of its investment.
While Ford’s balance sheet had $27 billion in cash in Q2, the company continues to pour capex into BlueOval City operation, its 5 million sq. ft. Tennessee Electric Vehicle Center where its next-gen electric truck is being built. Ford has been maintaining its $0.15 per share dividend, but that’s a drop in the bucket compared with the losing investment the company is making on EVs. Wall Street firm Morgan Stanley echoed investors’ sentiment when it decided to replace legacy automaker Ford as a top-pick auto stock with EV leader Tesla (Nasdaq: TSLA) despite the fact that Elon Musk’s company is more a play on tech than the auto sector. Until its bet on EVs starts to pay off, it could be a bumpy ride for Ford stock investors for the foreseeable future.
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