Ford CFO says inflation has erased Mustang Mach-E profits, but isn’t hurting demand for new vehicles


In this article

The Mustang Mach-E is Ford’s first new all-electric vehicle under an $11 billion investment plan in electrified vehicles through 2022.
Michael Wayland | CNBC

Ford Motor‘s CFO said Wednesday that the company isn’t yet seeing consumer demand for new vehicles drop off – but rising commodity costs have wiped out the profit it initially expected to make on its electric Mustang Mach-E.

Demand for new Fords and Lincolns continues to exceed supply, which is still constrained by an ongoing global shortage of semiconductor chips, Ford CFO John Lawler told analysts at a conference hosted by Deutsche Bank – even after the company raised vehicle prices to offset the effects of inflation.

For the most part, those price increases have preserved Ford’s profit margins, Lawler said. But the price increases weren’t enough to offset the impact of rising costs on the company’s electric Mustang Mach-E.

The model saw its costs increase by roughly $25,000, much of that due to sharply higher battery material costs. While the Mach-E was profitable when it was first launched in late 2020, that’s no longer true, he said.

Despite the upbeat report on demand, Lawler noted one emerging sign that consumers may be reaching their inflationary limits: Ford Credit, the company’s financing arm, has seen an uptick in “delinquencies,” or late payments.

Lawler said Ford is taking the possibility of a U.S. recession seriously and that the company has modeled several possible scenarios for a downturn.

Still, Ford and the broader auto industry are in a different position today than in past recessions, when the company typically held high inventories and increased discounts that eroded margins, Lawler said.

“We don’t have that today,” Lawler said. “We’re very lean on inventories. We have an order bank that’s significant at over 300,000 units. … As an industry and as a company, we’re heading into this [possible recession] in a much different position than we’ve ever been in before.”

Products You May Like

Articles You May Like

IRS Extends Tax Return Due Dates For Kentucky Storm & Flood Victims
Here’s Why More Fed Officials Are Warning That The Market Is Getting Ahead Of Itself
Evergrande Creditors Left With Few Options As Beijing Sets The Agenda
With domestic fares down 25% since spring, now’s the time to book flights for fall trips, travel app study finds
Rent prices are soaring in these 5 U.S. metros. Here’s what to know before moving to a cheaper area