(Bloomberg) — Ford Motor Co.’s hot-selling Mustang Mach-E electric SUV and other plug-in models are being rendered unprofitable by rising raw material costs.

Most Read from Bloomberg

  • Americans Are Building Vacation-Home Empires With Easy-Money Loans

  • China Alarms US With Private Warnings to Avoid Taiwan Strait

  • Volatility Grips Stocks as Treasury Yields Surge: Markets Wrap

  • Biden’s ‘Never Been More Optimistic’ Despite Troubled US Economy

  • Stocks’ Pandemic Bull Run Ends With Recession Fear: Markets Wrap

“We actually had a positive bottom line profit when we launched the Mach-E, commodity costs have wiped that out,” Chief Financial Officer John Lawler said Wednesday at the Deutsche Bank Global Automotive Conference, referring to 2020, when the vehicle went on sale. “You’re going to see pressure on the bottom line when we launch our EVs, they’re not going to be positive.”

Even so, Ford sees “a lot of opportunity” to take costs out of the Mach-E and other EVs, such as a future mid-size SUV, Lawler said. The company has said it’s re-engineering the vehicle on the fly to improve its margins.

The company also has boosted prices on the Mach-E this year, he said, without giving specifics. But the model, which Ford is recalling for a defect that could cause it to stop running, now costs $25,000 more to produce than an equivalent gas-powered Edge SUV, he said.

“We are working back to contribution-margin positive across all of our EVs,” Lawler said.

Ford is in the midst of launching the F-150 Lightning plug-in pickup and is spending $50 billion to roll out more EVs, with plans to build 2 million annually by 2026. For now, the company’s traditional internal combustion engine vehicles, like the Bronco SUV, are underwriting its new electric models. Lawler said the company’s goal is to make money on its EVs “as we’re scaling and we’re launching these vehicles.”

Loan Defaults

Ford’s top financial executive added the company is seeing an increase in auto loan delinquencies amid rising inflation and higher interest rates. He said loan defaults had been “very low” last year and now could be returning to pre-pandemic levels.

Story continues

“We’re looking for every indication and every data point we can to get a read on where the consumer is, where they’re headed, given everything we see out there, the inflationary pressures, the economic issues,” Lawler said. “We are seeing some headwinds there a little bit when it comes to delinquencies as maybe a leading indicator.”

Ford’s shares rose less than 1% at 1 p.m. in New York.

Most Read from Bloomberg Businessweek

  • A Billion-Dollar Crypto Gaming Startup Promised Riches and Delivered Disaster

  • A Parisian General Store’s Radical Message for Its Customers? Buy Less

  • A Ragtag Band of Hackers Is Waging Cyberwar on Putin’s Supply Lines

  • Amazon and Spotify Boost Podcast Offerings, and Audiences Soar

  • Mexican Biologists Aim to Save Hummingbirds With Wildflowers

©2022 Bloomberg L.P.

(305) 707 0888
FREE water test Quick estimate