Ford Motor is bracing for an economic downturn, despite continued consumer demand for new vehicles, according to the automaker’s chief financial officer.
Even though Ford has reported record profits and strong demand for electric vehicles like the Mustang Mach-E, rising battery material costs and inflation are wiping out any potential profit for the new car, Ford’s chief financial officer said Wednesday. Ford, John Lawler, at a conference organized by Deutsche Bank. and reported by CNBC. This is despite a recent rise in Mach-E prices to offset the effects of inflation.
Lawler said the vehicle’s price increase was enough to preserve Ford’s profit margins, but not enough to affect rising raw material costs. Although the chief financial officer did not share how much money Ford is losing on each Mach-E purchase, he said costs for the electric vehicle have increased by $25,000.
The news comes as Ford is recalling nearly 49,000 Mach-Es due to a malfunction that could cause the vehicle’s battery high voltage contactors to overheat, which can lead to loss of power while driving. and cause an accident. The company said a simple over-the-air update would fix the problem, but if the recalls got more complicated than that, it could cost the company millions.
Roadblocks like these call into question whether Ford, and other automakers churning out electric vehicles at a rapid pace, will be able to meet production and delivery targets over the next few years. In April, Ford already had to halt new orders for the 2022 Mach-E due to an inability to meet demand due to shortages of semiconductors and parts. The previous month, the automaker increased its investment in electric vehicles to $50 billion by 2026 and said it would run its electric vehicle unit as a separate entity from its combustion engine business.
It is not only on the side of the car manufacturers that we see emerging challenges in respecting the commitments. Customers are making payments to Ford Credit, the automaker’s vehicle finance arm, increasingly later, Lawler said, noting it’s another sign of headwinds.
Ford takes a possible U.S. recession seriously and is prepared to take several different approaches to past recessions, Lawler said.
“We are very lean on inventory. We have a large order bank with over 300,000 units,” Lawler said. “As an industry and as a company, we are moving towards this [possible recession] in a very different position than we have ever been in before.