Electrifying Its Best-Selling Pickup Isn't Enough To Bring Ford To The Promised EV Land

On Wednesday, Ford Motor F issued its second quarter results. Expectations were high after its Detroit peer, General Motors GM lifted its full year profit guidance a day earlier. However, despite posting solid financials that topped estimates and raising its financial targets, shares of GM fell on Tuesday as Wall Street seems to fear the good times won’t last.

Although Ford did not follow the footsteps of GM, its CEO Jim Farley assured investors that Ford+ restructuring plan is on track as the Blue Oval continues to seek greater profitability.

Second quarter highlights

For the April through June quarter, overall revenue, including its finance business, increased about 6% YoY to $47.81 billion. Automotive revenue amounted to $44.81 billion, surpassing LSEG’s estimate of $44.02 billion.

Ford Blue, which stands for traditional business operations, brought in $1.17 billion. Ford Pro commercial business exceeded the traditional business as it brought in $2.56 billion, while the “Model e” EV unit reported a loss of $1.14 billion. However, this does not mean that Ford’s EV sales are not doing well as quite the opposite, they surged 61.4%during the reported quarter fueled by Mustang Mach-E, Ford Lightning pickup, and E-Transit EV van. General Motors also reported EV deliveries surged 40% YoY during the second quarter.

Increases in its warranty reserves used to pay for vehicle issues weighed down profitability. Although CFO John Lawler did not disclose the total warranty costs, he did reveal they were $800 milion greater compared to the previous quarter. Net income for the second quarter was $1.83 billion, or 46 cents per share with the adjusted EBIT declining 27% YoY to $2.76 billion or 47 cents per share, short of LSEG’s consensus estimate of 68 cents. 

Raised gree cash flow guidance, but earnings outlook left without a lift.

Full year guidance was maintaned, with adjusted earnings before interest and taxes, or EBIT, expected in the range between $10 billion and $12 billion.

Ford+ restructuring plan remains on track.

With recent initiatives aimed at improving quality, Ford expects to bring down future warranty costs. Lawler spoke of Ford making a real progress in raising quality, lowering costs and reducing complexity across the entire enterprise, which will undoubedly benefit the GM rival down the road. When announced in May 2021, the Ford+ initially revolved around EVs, but it has since been adjusted to adapt to customer choice and finding next-generation EVs that would drive profits. Now more realistic and sharpened, Ford’s vision includes a small next-generation EV platform, which is a contrast compared to its best-selling pickup maker identity. 

But, EVs still only make a fraction of total sales.

During the earnings call, Farley stressed that Ford is focusing on smaller and more profitable EVs in an effort to compete with Tesla Inc TSLA and Chinese rivals like BYD. Although the EV unit reported remarkable growth, enabling Ford to keep its second best sellling EV maker position in the U.S. right behind Tesla, outpacing GM, Ford is still facing significant challenges on this front as it also gudied for a full year loss of  $5.5 billion. Impressively, the electric version of the F-150, the Lightning, recorded a sales jump of 77% while Mustang Mach-Efollowed with a surge of 46.5%, but the E-Transit van won the race with a sales rise of 95.5%.  But the reality is that Ford has cut back on the productoion of Lightning and delayed abouy $12 billion in EV spending in response to slower than expected demand.

As for GM, EVs made only 3.2% of  total second-quarter U.S. sales. GM does expect to become profitable in this arena, on a productio or contribution-margin basis, once it reaches the output of 200,000 units which is expected by the fourth quarter. 

But the EV landscape continues to evolve, with innovative companies like Worksport Ltd WKSP expected to raise the bar when it comes to electric pickups. This summer, Worksport is expected to launch the Alpha release of its solar-powered tonneau cover, Solis. Worksport is epxected to make quite a contirbution to the automotive sector with its intellectual asset portfolio. Together with the COR, a portable battery system, the SOLIS part of a power duo that Worksport developed with which it promises off-grid power on the go. The Solis will be available for the Ford F-150 Lightning, as well as light pickup trucks from General Motors, Stellantis, opening many new possibilities. As history has showed us, innovation has the way of paving the way for success. Therefore, just because it currently seems that the EV revolution is slowing down, it does not mean things could change in a blink of an eye when powerful innovation enters the room.

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