Ford CFO Claims Inflation Has Erased Mustang Mach-E Profits

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【Summary】Inflation and the rising commodity costs of manufacturing vehicles have seen Ford’s cost to manufacture the electric Mach-E skyrocket to levels where the SUV is no longer profitable.

Original Vineeth Joel Patel    Jul 25, 2022 6:45 AM PT
Ford CFO Claims Inflation Has Erased Mustang Mach-E Profits

The COVID-19 pandemic hit automakers hard. Automotive companies had to stop manufacturing vehicles for some time and have been dealing with ongoing supply chain issues because of the pandemic. The semi-conductor chip shortage was brought on by the CVOID-19 pandemic and has affected vehicle production, the prices of cars, and the availability of new cars. If the semi-conductor chip shortage wasn't bad enough, automakers are now looking at inflation and rising costs of materials. 

EVs Pricier to Build

It's no secret that the U.S. has been hit hard by inflation. Gas is insanely expensive, food prices have skyrocketed, and rent has hit crazy figures across the country. For automakers, the situation has become a dire one, as prices for materials have hit absurd figures. For Ford, the cost to manufacture the Mustang Mach-E has become so expensive, that it's wiping all of the automaker's profits that it expected to make with the EV. It's not just the Mach-E, but Ford's other electrified vehicles are also unprofitable. 

"We actually had a positive bottom line profit when we launched the Mach-E, commodity costs have wiped that out," said Chief Financial Officer John Lawler at the Deutsche Bank Global Automotive Conference, reports Bloomberg. Lawler is referring back to 2020 when the Mach-E was launched. "You're going to see pressure on the bottom line when we launch our EVs, they're not going to be positive." 

Bloomberg claims that the cost to manufacture the Mustang Mach-E is now $25,000 more than an equivalent Edge SUV. With Ford being an automaker that's in the business of making money, there's only way one it can make up the difference – raise the prices of its vehicles. Ford tried to do this before the end of 2021 by raising the price of the Mach-E by up to $3,000 on certain trims. That, apparently, wasn't enough to make the vehicle profitable. 

Ford's Relying On Gas Vehicles

Ford is lucky enough to have gas-powered vehicles that are reportedly "underwriting its new electric models." Making money with EVs during a time when materials are so costly will be difficult, but Lawlers claims Ford's goal is to make money "as we're scaling and we're launching these vehicles." 

Increased pricing for materials is inconvenient for everyone, but they're coming at a really bad time for Ford. The automaker has been on a hot streak with the Mustang Mach-E and all-electric F-150 Lightning. Both are priced relatively affordably for their respective all-electric segments, but with the increased cost of materials, Ford will certainly have to raise prices going forward. Ford still sees "a lot of opportunity" to adapt during the current climate to improve its margins, claiming that it is re-engineering its electric vehicles on the fly.  

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