The Mustang Mach-E is Ford’s first new all-electric vehicle as part of its $11 billion investment plan in electrified vehicles by 2022.
Michael Welland | CNBC
ford motorThe company’s CFO said Wednesday that the company isn’t seeing a lull in consumer demand for new vehicles just yet — but rising commodity costs have erased the advantage it was initially expected to have on the electric Mustang Mach-E.
Ford CFO John Lawler told analysts at a conference hosted by Deutsche Bank that demand for the new Ford and Lincoln exceeded supply, which is still constrained by an ongoing global shortage of semiconductor chips — vehicles to offset the company’s impact. Inflation even after raising prices.
For the most part, those price increases have preserved Ford’s profit margins, Lawler said. But the price hike wasn’t enough to offset the impact of rising costs on the company’s electric Mustang Mach-E.
The model saw its cost increase significantly due to increasingly high battery material costs. While Mach-E was profitable when it was first launched in late 2020, this is no longer true, he said.
Despite upbeat reports on demand, Lawler noted an emerging sign that consumers are reaching their inflation limits: Ford Credit, the company’s financing arm, has seen an increase in “crimes” or late payments.
Lawler said Ford is taking the prospect of a US recession seriously and that the company has prepared a number of possible slowdown scenarios.
Still, Ford and the broader auto industry are in a different position today than they were in the previous recession, when the company had typically increased inventory and margin-shrinking discounts, Lawler said.
“We don’t have that today,” Lawler said. “We are heavily dependent on inventory. We have an order bank that is significant at over 300,000 units. … As an industry and as a company, we are growing in [possible recession] We are in a very different position than we were before.”
Correction: This story has been updated to remove an incorrect figure for cost escalation associated with manufacturing Ford’s Mustang Mach-E. Ford CFO John Lawler did not provide any numbers for that increase.