Ford Motor, which suffered a net loss of $2 billion in 2022, turned losses into profits after delaying its electric vehicle investment plan last year.
According to the latest operating results, Ford's revenue reached $176.2 billion last year, an increase of 11% year-on-year, and its net profit reached $4.3 billion, which turned positive compared to the previous year.
Ford stated that the improvement in profitability is related to the adoption of a light asset model in operations in China and other markets. During last year's first quarter financial report conference call, Ford CEO Jim Farley stated that the brand will conduct business in China with less investment and higher returns.
After the leader spoke, Ford China accelerated its export pace and streamlined its personnel. Farley said that in the future, Ford will use China as a production base to export lower priced electric and commercial vehicles to markets such as South America, Australia, and Mexico.
The adjusted strategy is vastly different from Ford's ambitions for the Chinese new energy market that were revealed a few years ago.
In 2019, Ford plans to launch over 10 new energy vehicle models in China within three years and increase its research and development efforts in autonomous driving. But to this day, its new energy products launched in China are not only limited in quantity, but also lack core competitiveness.
Faced with the rise of local Chinese brands, Ford's sales in China in 2022 were 496000 units, a year-on-year decrease of 33.5%, less than 40% of its peak period. Even with the reform of sales channels in China, it is unable to change the sluggish situation, and the main joint venture company of passenger cars, Changan Ford, saw another decline in sales last year.
Not only did Ford disappoint in China, but it also encountered obstacles in promoting new energy transformation at its home ground in the United States. Last October, Ford management announced that North American consumers were unwilling to accept high priced electric vehicles and would delay a total investment of $12 billion in electric vehicles.
During the months long UAW strike, Ford suffered losses of up to $1.3 billion, even exceeding its net profit in the third quarter. The latest labor management agreement will increase Ford's cost per vehicle by $850 to $900 and decrease its profit margin by approximately 0.7%.
To address numerous challenges, Ford has shifted its electric vehicle strategy from a focus on functional research and development to prioritizing cost efficiency. Specific measures include suspending cooperation with SK On to build a second battery factory, and reducing production lines for certain vehicle models.
However, Ford's CFO stated that a new generation of electric vehicles will still be launched after careful evaluation. Farley recently announced that Ford is developing a low-cost electric vehicle platform that may bring stronger competitiveness. It is reported that the platform is not only suitable for various vehicles, but also provides support for software and other services.
Ford's competitor in the electric field, Tesla, has been advocating for affordable electric vehicles earlier. The company plans to start producing the next generation of cars in the second half of 2025, with an expected price of less than $25000.
Currently, high cost-effective models from China have made their debut in markets such as Europe and Southeast Asia. For Ford, the amount of competitive advantage it can gain may depend on its cost reduction and the speed of launching low-priced models.