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On July 25, Eastern Time, Ford Motor Company's stock price plummeted 18%, marking its worst single-day performance since 2008.

Analysts believe that the sharp drop in Ford's stock price is largely due to its loss-making electric vehicle business.

According to the second quarter financial report, Ford's electric vehicle business sold 26,000 vehicles in the second quarter, with a loss of $1.1 billion before interest and taxes, and an average loss of $42,300 (about RMB 306,000) per electric vehicle. In the first half of the year, a total of 36,000 electric vehicles were sold, with an average loss of $69,400 (about RMB 503,000) per vehicle.

How can Ford, a century-old automobile company, make up for the losses in its electric vehicle business?

Ford's earnings miss expectations

Ford's second-quarter financial report showed that the company's net profit for the quarter was $1.8 billion, far below market expectations. Among them, the electric vehicle business had a pre-tax loss of $1.1 billion in the second quarter.

Ford said the main reason for its lower-than-expected second-quarter results was a significant increase in warranty costs for older vehicles.

Ford Chief Financial Officer John Lawler responded that there were quality-related issues with models produced in 2021 and earlier, which caused warranty costs to increase to $800 million in the second quarter, exceeding investor expectations.

Ford CEO Jim Farley has made addressing the automaker's quality issues a top priority since taking over in October 2020, but the number of recalls still ranks first in the industry.

Ford is also having some difficulties in its electrification transformation.

Ford Motor said that the current electric models of the electric vehicle business unit faced downward pressure on industry prices and declining wholesale volumes in the second quarter of this year. Although the business unit cut costs by $400 million compared with the same period last year, it still lost $1.1 billion in earnings before interest and taxes. Ford Motor expects its electric vehicle business unit to lose between $5 billion and $5.5 billion in 2024.

Zhang Xiang, researcher at the Automotive Industry Innovation Research Center of North China University of TechnologyIn an interview with China News Service, Ford said that the global transition to new energy is slow and it still relies on traditional fuel vehicles to maintain its market competitiveness. In the Chinese market, Ford is relatively conservative in fuel vehicle technology innovation, and the small-displacement three-cylinder engine it launched has not been widely recognized by Chinese consumers. At the same time, Ford's electric vehicle sales in China are also facing difficulties. Currently, it has only introduced two models, and its sales are far below expectations.

Pickup trucks and commercial vehicles performed well

In addition to the electric vehicle business, Ford Motor Company has performed solidly in other areas.

The financial report disclosed that Ford Motor's total revenue in the second quarter was US$47.8 billion, a slight increase of 6% year-on-year.

Ford said the increase in total revenue was due to an increase in wholesale volumes, helped by momentum from "record" sales of the new F-150 pickup truck and Transit commercial truck. In the second quarter, Ford also became the top-selling fuel vehicle brand in the U.S. market.

Under the Ford+ plan, Ford will divide its group business into three departments: Ford Blue will be responsible for traditional power vehicles (including hybrid) business, Ford Model E will be responsible for electric vehicle business, and Ford Pro will be responsible for commercial and super truck business.

At present, Ford's most popular product is still the pickup truck. Jim Farley said that in 2023, more than 700,000 customers chose the new Ford F-Series truck, making it the best-selling truck in the United States for the 47th consecutive year and the best-selling model in the country for the 42nd consecutive year.

Jim Farley also said earlier that unlike electric vehicles, super pickups have huge market demand and huge profits. The company will use the Oakville plant in Ontario, Canada to produce traditional fuel-powered super pickups instead of the previously planned electric Explorer and Lincoln Navigator SUVs.

Car blogger Guo Yining, also known as "Lao Guo Mechanical Bureau"In an interview with China News Service, he said that from the perspective of the US market, Ford still occupies a dominant position in the pickup truck segment. With its strong competitiveness and considerable profits in the pickup truck market, Ford has been able to maintain its leading position in the US market and its business conditions are relatively stable.

In Zhang Xiang's view, the technology and R&D experience accumulated by Ford in the era of fuel vehicles are still competitive in the US market. However, due to the significant differences in technology and R&D requirements between new energy vehicles and traditional fuel vehicles, Ford cannot afford the high costs required for R&D and investment in new products. These factors have jointly led to Ford's failure to gain market recognition for new energy vehicles, resulting in a situation where electric vehicles are difficult to make a profit, while pickup trucks and commercial vehicles are still profitable.

Ford adjusts China strategy

At present, the entire automotive industry is in a critical period of transformation to new energy. The Chinese market is one of the most important markets in this transformation process. As the world's largest automobile market, China's demand for new energy vehicles continues to grow, and policy support is also increasing.

Zhang Xiang suggested that Ford could consider cooperating with Chinese car companies and introducing China's new energy technology platform to seize the key window period for new energy development.

On July 22, Xpeng Motors and Volkswagen Group signed a strategic cooperation and joint development agreement on electronic and electrical architecture technology. Both parties will devote all their efforts to developing industry-leading electronic and electrical architecture for Volkswagen's CMP and MEB platforms produced in China. The first model equipped with the electronic and electrical architecture jointly developed by the two parties is expected to be mass-produced within 24 months.

Guo Yining suggested that if Ford wants to gain a foothold in the Chinese market, the most important point is to adapt to the operating logic and methods of the Chinese market. This is also the reason why many Chinese brands perform well in the local market - they have a deep understanding of the needs of Chinese consumers and can make targeted adjustments.

"In contrast, many joint venture automakers adopt globally unified standards in technology and publicity and promotion, and are restricted by foreign concepts and cannot carry out targeted localization adjustments. Therefore, joint venture automakers need to carry out comprehensive localization transformation. This is not just a technological improvement, but an all-round transformation of all departments. From senior management to grassroots employees, they all need to have the determination to completely localize in order to truly solve this problem." Guo Yining said.

Currently, Ford is also actively making adjustments. In May this year, Ford China announced that Ai Xiaoming would serve as the president of Changan Ford Automobile Co., Ltd. and report to the Changan Ford board of directors.

Ford China believes that Ai Xiaoming's rich experience and expertise in comprehensive corporate management and operational transformation will help him lead the Changan Ford team to strengthen cooperation with partners, continuously improve product quality and capacity utilization, and accelerate Changan Ford's transformation toward electrification and intelligence.

Editor-in-chief: Zhang Wu Text editor: Song Hui Title image source: Xinhua News Agency/AFP Photo editor: Shao Jing

Source: Author: National Express