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Dearborn-based Ford Motor Co (NYSE:F), on Wednesday, reiterated its commitment to cutting costs in its EV segment to counter its growing losses and withstanding the ongoing price war.
What Happened: Ford is eyeing hitting profitability in its EV segment with the launch of its next generation of EVs. However, the launch timeline of these vehicles is currently under wraps. In the meantime, the company is looking to cut costs of the business, CFO John Lawler said during the company’s first-quarter earnings call on Wednesday.
“We’re going to continue to work on driving every dollar of cost out of the business in the near term,” he said.
But revenue over the past several months is dropping faster than the company is able to reduce costs, Lawler conceded, referring to the price war triggered by EV giant Tesla which forced others including Ford to cut prices to retain their market share.
“If the pricing stabilizes and we don’t see these significant reductions continuing across the industry, then I think that you could probably start to see some of those cost reductions flow to the bottom line,” he said.
While at the onset of EV adoption customers were willing to pay a premium for an EV, they are now looking for cheaper options, Lawler noted.
“We think that prices for EVs are going to normalize around where gas is and the consumers are going to weigh the value proposition of that propulsion choice,” Lawler said while adding that the company does not see EV prices falling below gas vehicle prices.
Why It Matters: Ford’s EV segment called “Model e” posted an EBIT loss of $1.3 billion in the first quarter, a drastic jump from the EBIT loss of $0.7 billion reported in the corresponding quarter of 2023.
Revenue, likewise, fell 84% year-on-year to $0.1 billion, partly due to the industry-wide pricing pressure.
For 2024, Ford expects its EV division to post an EBIT loss between $5.5 billion and $5 billion, widening from the EBIT loss of $4.7 billion recorded last year.
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