After a loss of over $100000 in the first quarter, Ford's electric vehicle business once again dragged down its performance.
On July 24th local time, Ford Motor Company released its Q2 2024 financial report, which showed that the company's revenue for the quarter was $47.8 billion, a year-on-year increase of 6.3%; Net profit was 1.8 billion US dollars, a year-on-year decrease of 4.5%; Adjusted pre tax profit of $2.8 billion; Earnings per share of $0.47 fell short of analysts' expectations.
From January to June 2024, Ford's cumulative revenue was $90.585 billion, compared to $86.428 billion in the same period last year, a year-on-year increase of 4.81%; The cumulative net profit for the first six months was 3.167 billion US dollars, while the cumulative net profit for the same period last year was 3.679 billion US dollars, a year-on-year decrease of 13.92%.
John Lawler, Chief Financial Officer of Ford Motor Company, stated that the decline in second quarter profits was mainly due to the launch of new products and the increase in warranty related costs for older cars. Specifically, warranty costs increased by $800 million from the first quarter to the second quarter, mostly related to older models launched in 2021 or earlier. Ford stated that 'this is growth beyond plan'.
To this end, Ford is also attempting to cut costs and reduce the number of models produced, eradicate structural inefficiencies, and transform its fuel and electric vehicle businesses, reducing the complexity of its manufacturing operations. Lawler stated that "such a large-scale transformation process will be bumpy.
From the perspective of segmented business, the three business units under the "Ford+" plan: Ford Pro, responsible for commercial and super truck business, contributed the majority of profits, with a quarterly revenue of $17 billion and an EBIT of $2.564 billion; The traditional fuel vehicle business Ford Blue had a revenue of $26.7 billion and a pre tax profit of $1.171 billion for the quarter; The Model E department of the electric vehicle business is still deeply mired in losses.
Due to the industry's price pressure and declining wholesale sales of first generation electric vehicles, as well as investments in next-generation electric vehicles, the electric vehicle business incurred a pre tax loss of $1.1 billion in the second quarter, compared to $1.3 billion in the previous quarter. Ford expects a loss of up to $5.5 billion for its electric vehicle business in 2024, close to the total profit of its internal combustion engine division, Ford Blue.
Jim Farley, President and CEO of Ford Motor Company, stated that the company believes that small, affordable electric vehicles are the way out for the company.
In June, Ford announced the launch of a pure electric vehicle priced at $30000 (approximately RMB 218100), aimed at reducing the cost of electric vehicles and responding to Chinese car manufacturers such as BYD, as well as competitors such as Tesla. It is expected to achieve profitability within approximately two and a half years.
In Jim Farley's view, as Chinese automakers continue to expand globally, it is crucial for Ford to produce profitable electric vehicles within the next five years, otherwise Ford will lose its voice in the electric vehicle market. Ford will focus on making profits through small electric vehicles, while large trucks and SUVs will continue to be driven by fuel as Ford's profit engine.
If we cannot make money on electric vehicles, our competitors will have the world's largest market, they have already occupied a global dominant position and established supply chains around the world. If we cannot produce profitable electric vehicles in the next five years, our market will only be in North America in the future
In addition to entering the market for economical pure electric vehicles, developing hybrid vehicle business is also Ford's top priority in the short term. Currently, Ford is significantly increasing the production and sales of its hybrid vehicle models. According to the plan, the sales of Ford hybrid vehicles will increase by 40% this year and four times in the coming years.
The "bottomless pit" of losses in the electrification business is difficult to stop, and it has been cut off by Chinese new energy vehicle companies such as BYD. However, the "bleeding" sales of cars have not yet received quantitative feedback. Ford, which is moving towards electrification under pressure, has begun to re-examine itself, prioritize efficiency, and make more pragmatic choices.
Overall, the path of electric vehicles is humble, forcing us to adapt, including applying it to our traditional fuel engine business, which will bring returns in the long run, "said Farley. Ford's interest in collaborating with other companies to develop electric vehicles" has reached a historical high.
Despite lower than expected profits in the first half of the year and two consecutive quarters of losses exceeding $1 billion in the electric vehicle business, Ford still maintained its original profit target for the full year, with adjusted profits in the annual guidance range of $10 billion to $12 billion; But the adjusted free cash flow forecast has been raised by $1 billion to $7.5 billion to $8.5 billion.
We cannot interpret this quarter's performance as off track this year. The fact is not so, "said Lawler. The company still has great confidence in this year's performance. The plan is working. In this transformation, it won't be a straight line. We will encounter some obstacles in the process of reshaping