Final week, Ford (NYSE: F) launched its Q2 2023 earnings. One of many key takeaways from the report was that the automotive large goes sluggish on its electrical automobile (EV) enlargement plan and concurrently specializing in hybrids.
To start with, Ford reported a stable set of numbers within the second quarter and its revenues got here in at $42.43 billion which was nicely forward of the $40.38 billion that analysts anticipated. Its adjusted EPS of 72 cents additionally surpassed analysts’ estimate of 55 cents. It additionally raised its full-year pre-tax revenue steering to $11 billion-$12 billion from the earlier steering of $9 billion-$11 billion.
Ford inventory fell after the Q2 earnings launch
It additionally raised its adjusted free money move steering from $6 billion to $6.5 billion to $7 billion. Fellow legacy automaker Basic Motors additionally posted better-than-expected earnings and raised its full-year steering. Nevertheless, nonetheless, each shares fell after the earnings launch. By the way, there was a broad-based rally in pure-play EV shares final week and Chinese language EV shares like NIO (NYSE: NIO) and Xpeng Motors (NYSE: XPEV).
Key takeaways from F’s Q2 earnings
Ford’s Mannequin e which is the EV enterprise misplaced $1.08 billion within the second quarter which was preceded by a lack of $722 million within the earlier quarter. The corporate now expects the enterprise to lose $4.5 billion this yr which is wider than the $3 billion pre-tax loss that it beforehand forecast.
Ford additionally scaled again its bold EV pivot and stated that it now expects to achieve an EV manufacturing capability of 600,000 items by the top of 2024 versus the earlier steering of hitting that objective by the top of this yr solely.
Beforehand, F had stated that its EV manufacturing capability would rise to 2 million items by 2026. Nevertheless, in the course of the Q2 earnings name it stated, “we keep flexibility on the place we attain after we attain two million complete EV international capability as a result of we’re balancing progress, profitability, and returns.”
EV worth battle
Alluding to the EV worth battle, Ford stated, “Contribution margin and EBIT margin have been each destructive with pricing and quantity pressures intensified, and that’s impacting all OEMs. Given the speedy and dynamic acquire on the pricing surroundings, we not count on to see contribution margin breakeven for our Gen 1 merchandise this yr.”
The corporate nonetheless nonetheless expects the Mannequin e to achieve a pre-tax revenue margin of 8% by 2026.
The EV worth battle has worsened and Ford even lowered the worth of its F-150 Lightning by as a lot as $10,000. Nevertheless, in the course of the earnings name the corporate stated that regardless of the worth reduce, the mannequin’s costs are above what they have been on the time of the launch.
It stated, “Whereas EV adoption continues to be rising, the paradigm has shifted. EV worth premiums over inner combustion autos fell greater than $3,000 within the second quarter and practically $5,000 in first half. We count on the EV market to stay risky till the winners and losers shake out.”
Ford to concentrate on hybrids
In the meantime, Ford can also be specializing in hybrids taking a leaf out of Toyota’s playbook. It stated that hybrids account for round 10% of F-150 gross sales whereas the corresponding determine for Mavericks is a whopping 56%.
Throughout the earnings name, Ford CEO Jim Farley stated, “What the shopper actually likes is after we take a hybrid system that’s extra environment friendly for sure obligation cycles after which we add new capabilities due to the batteries.”
He added, “We have now been shocked, frankly, on the recognition of hybrid methods for F-150.” He stated that Ford would provide extra hybrid autos sooner or later.
Ford continues to be bullish on its EV pivot
Regardless of the short-term challenges, Ford is bullish on its EV enterprise and Farley stated, “EV clients are model loyal and we’re successful plenty of them with our high-volume, first-generation merchandise; we’re making good investments in capabilities and capability world wide; and, whereas others are attempting to catch up, we now have clean-sheet, next-generation merchandise in superior growth that can blow folks away.”
Throughout the earnings name, Ford stated that lots of its EV clients together with for the F-150 Lightning are new to Ford.
Ford partnered with Tesla for Superchargers
In Could, Tesla (NYSE: TSLA) and Ford introduced a partnership underneath which Tesla would open up over 12,000 Superchargers throughout the US and Canada for Ford drivers starting early subsequent yr.
The partnership acted as a template for different corporations and over the subsequent two months, corporations like Basic Motors, Rivian (NYSE: RIVN), and Polestar (NYSE: PSNY) additionally introduced related partnerships with Tesla.
Morgan Stanley reiterated F inventory as obese
After the earnings launch, Morgan Stanley reiterated F inventory as obese and stated, “Strong 2Q beat and upped FY information pushed by robust margin and money flows from Blue and Professional.”
Notably, regardless of higher-than-expected EV losses, Ford was in a position to not solely put up better-than-expected earnings for the second quarter but in addition elevate its full-year steering. Nevertheless, the corporate’s EV pivot hasn’t been as clean as anticipated.
That stated, Ford is rather more clear than different legacy automakers because it supplies the breakdown of its EV losses – not like different legacy automakers whose worthwhile inner combustion engine operations masks their EV losses.
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