Back in March, Ford CFO John Lawler admitted that the automaker’s all-electric vehicles wouldn’t be profitable until the second generation arrived, but the Ford Mustang Mach-E proved to be an exception to that rule early on with the EV crossover was turning a profit from the day it launched, as Ford Authority reported last September. In the months since, The Blue Oval has been able to find additional cost savings in the Ford Mustang Mach-E, but rising materials costs have mitigated those margins, as Lawler admitted while speaking at the recent 2022 Deutsche Band Global Auto Industry Conference.
“Yeah. So, we had talked about when we launched the Mach-E, it being contribution margin positive and we actually had a positive bottom line profit when we launched the Mach-E,” Lawler said. “Commodity cost has wiped that out so, from a bottom line standpoint.”
Over the past few months, a number of Ford’s suppliers – including EV battery maker CATL and Bosch – have announced that they will be raising prices as the cost of raw materials continues to skyrocket. In fact, EV battery costs alone are expected to rise as much as 40 percent over the next two years, which recently led to Ford’s stock being downgraded by Wells Fargo analysts.
There are a few ways that Ford plans to at least somewhat mitigate these exploding costs, however. For starters, CEO Jim Farley recently admitted that the automaker is exploring the idea of vertically integrating raw materials into its business, while it’s also looking at switching from lithium-ion batteries to cheaper lithium iron-phosphate units. On a broader scale, the U.S. Department of State also just announced that it has entered into a Minerals Security Partnership with key partner countries designed to keep the supply chain flowing smoothly moving forward, which could help bring prices back down as well.