Ford (NYSE: F) has halted the production and shipments of its F-150 Lightning pickup due to a battery issue. It looks like another trouble for the company after its CEO Jim Farley rued “execution” woes during the Q4 2022 earnings call.
Ford spokeswomen Emma Bergg said, “As part of our pre-delivery quality inspections, a vehicle displayed a potential battery issue and we are holding vehicles while we investigate.” She added that the plant has been idle since the beginning of the last week.
Bergg said that “the team is diligently working on the root cause analysis” and emphasized that Ford is “doing the right thing by our customers” by resolving the issues before shipping the vehicle.
Ford halts F-150 production over battery issues
The issues related to F-150 look like a continuation of the “execution” issues that Farley highlighted during the Q4 2022 earnings call. During the quarter, Ford missed earnings estimates.
Farley said, “We left about $2 billion in profits on the table that were within our control, and we’re going to correct that with improved execution and performance.” He stressed, “to say I’m frustrated is an understatement because the year could have been so much more for us at Ford.”
F-150 Lightning deliveries began in 2022 only
Ford began delivering the F-150 Lightning, which is the all-electric version of its best-selling F-150 pickup last year only. It was the first mainstream EV pickup model and is especially crucial for Ford. Rivian also sells R1T pickup while Lordstown also started shipping its Endurance late last year.
Tesla’s Cybertruck deliveries are also scheduled to begin this year but the company has said that the model would not see mass production until 2024.
Incidentally, there has been a price war in the EV market but so far there haven’t been price cuts in the electric pickup market apparently due to limited competition.
Ford raised F-150 prices in October
On the contrary, in October, Ford raised F-150 Lightning prices. It was the second price hike for the all-electric model of the F-150 pickup truck in two months and came amid inflationary pressures.
Ford increased the price for its 2023 F-150 Lightning Pro by $5,000 to $51,974. While in August, the company increased the price across all F-150 Lightning models, in October it only announced a price hike for the starting model.
While Ford does not provide the profitability breakup of the F-150, the F-series is believed to be a $42 billion business and the single biggest contributor to the company’s profitability. The profits from Ford’s F-150 sales are widely believed to subsidize some of the other loss-making models. Unsurprisingly, Ford has big expectations from the F-150 Lightning model.
F expects F-150 Lightning to be profitable
Unlike some of the other electric vehicle companies that are making losses and burning cash for every car that they sell; Ford predicted the F-150 electric model to be profitable from the beginning.
The company is targeting a pre-tax margin of 8% in its EV business. From now on Ford would start reporting the results of its EV business as a separate segment which would provide insights into the profitability of the business.
Ford announced a battery plant in partnership with CATL
Ford has announced a $3.5 billion investment to build a battery plant in Michigan. China’s CATL would be the partner for the plant which would add around 2,500 jobs. However, Ford choosing a Chinese partner hasn’t gone well with the Republicans.
Republican House Majority Leader Steve Scalise has criticized Ford for partnering with a Chinese company for crucial battery technology.
Senator Marco Rubio has called upon the Biden administration to review the deal. In a statement posted on his website, Rubio said, Ford’s partnership with CATL “will only deepen U.S. reliance on the Chinese Communist Party for battery tech, and is likely designed to make the factory eligible for Inflation Reduction Act (IRA) tax credits.”
Inflation Reduction Act of 2022
Notably, the Inflation Reduction Act mandates that the $7,500 EV tax credit won’t be applicable if the battery is produced or assembled by a “foreign entity of concern.” It’s likely that since Ford would own the battery plant its vehicles would still get the tax credit despite the CATL partnership.
Ford has been transforming its business under its CEO Jim Farley who joined the company in 2020. F has reorganized its business and Ford Blue would look after its legacy ICE business.
Jim Farley is working on the EV transition
The business would work towards lowering costs, improving quality, and would also provide manufacturing and engineering capacity for the entire company. The second business would be Ford Model e which would look after the company’s EV operations. Ford Pro would look after the commercial vehicle business.
The company is working towards a zero-emission future and has announced 3,800 job cuts in Europe as part of its pivot to electric cars.
The company is targeting annualized EV production of 600,000 by the end of this year and 2 million by 2026. To put that in perspective, Tesla, which is the largest EV seller globally, expects to ship 1.8 million vehicles this year.
Meanwhile, the battery issues of the F-150 Lightning look another trouble for the company as it tries to position itself as a worthy challenger to Tesla. Last year, Ford became the second-largest EV seller in the US.
The company has massive EV plans but the “execution” issues seem to be playing a dampener at least in the short term.
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