FORD MUSTANG MACH-E PROFIT MARGIN ERODED BY RISING COMMODITY PRICES

Ford has seen considerable demand for its new vehicles, and it doesn’t seem like that will go away anytime soon. However, as commodity cost continues to rise, the profit margin of their vehicles drops, and according to CNBC, Ford CFO John Lawler has stated that the profit for the Mustang Mach-E has been wiped out. This could very well be a sign of what’s to come in the future.

Ford Mustang Mach-E: Losing Profit

New Ford and Lincoln vehicles continue to see high demand, but production continues to be constrained by supply shortages. In addition, Lawler told analysts at a conference with Deutsche Bank that even after the company raised vehicle prices to offset inflation’s effects, it hasn’t been enough to offset the impact of climbing costs on the company’s electric Ford Mustang Mach-E. While the Mach-E was profitable when it was first launched in late 2020, that’s no longer true as battery material costs are substantially higher.

Lawler noted that despite the upbeat report on vehicle demand, there are signs that consumers are reaching their inflationary limits. Ford Credit, the company’s financing arm, has seen a rise in “delinquencies,” or late payments. Lawler has stated that Ford is taking the possibility of a U.S. recession seriously, and the company has modeled multiple scenarios for a potential downturn.

In the past, Ford typically held high inventories and increased discounts that helped erode margins. However, today “we’re very lean on inventories.” Ford Motor Company has an order bank that’s substantially higher than 300,000 units, and the industry and the company will be entering the possible recession in a much different position than ever before. By that, Lawler means that Ford may not be unaffected by the downturn like they were in the past, and if things are heading in that direction, those orders could be canceled as people can no longer afford a new vehicle.

Across town, at General Motors, the automaker recently announced price hikes of the GMC Hummer EV ahead of the launch of the EV3X trim level – which is a slightly more affordable version the the 1,000 hp Edition 1 model. The markup is largely seen as a counter to rising commodity prices that are beginning to ripple through America’s largest automaker. GM is also in the middle of launching the all-electric Cadillac Lyriq SUV, with an electric Chevrolet Equinox, Blazer EV, and Silverado EV confirmed to to follow.