Ford Motor is preparing for an economic downturn, despite steady consumer demand for new vehicles, according to the automaker’s chief financial officer.
Even though Ford has seen record profits and strong demand for electric vehicles like the Mustang Mach-E, rising battery material costs and inflation are erasing any potential profits for the new car, said Ford CFO John Lawler on Wednesday at a conference hosted by Deutsche Bank and reported on by CNBC. This is despite a recent price hike of the Mach-E to offset the effects of inflation.
Lawler said increasing the price of the vehicle was enough to preserve Ford’s profit margins, but not enough to impact the increased costs of commodities. While the CFO didn’t share how much money Ford is losing on each Mach-E purchase, he said costs for the EV have increased $25,000.
This news comes as Ford is in the midst of recalling nearly 49,000 Mach-Es because of a malfunction that could cause overheating of the vehicle’s battery high-voltage contactors, which can result in loss of power while driving and cause an accident. The company said a simple over-the-air update will fix the problem, but if the recalls become more involved than that, it could cost the company millions.
Roadblocks like these call into question whether or not Ford, and other automakers producing EVs at a rapid clip, will be able to meet production and delivery goals over the next few years. In April, Ford already had to shut down new orders for the 2022 Mach-E due to an inability to meet demand amid semiconductor and parts shortages. The month prior, the automaker had increased its EV investment to $50 billion by 2026, and said it would run its EV unit as a separate entity from its combustion engine business.
It’s not only on the automaker side that we’re seeing challenges meeting commitments emerge. Customers are making payments to Ford Credit, the automaker’s vehicle financing arm, later and later, said Lawler, noting that this is another sign of headwinds.
Ford is taking a possible U.S. recession seriously and is prepared to follow several different approaches to past recessions, Lawler said.
“We’re very lean on inventories. We have an order bank that’s significant at over 300,000 units,” said Lawler. “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.”