Ford Was America’s Best-Selling Brand in Q1 Even as EV Sales Fell

Ford (NYSE: F) sold 456,972 vehicles in America in the first quarter of 2023 which made it the best-selling brand. The company’s EV (electric vehicle) sales meanwhile plummeted and it fell to the fifth rank in electric car sales.

Ford’s vehicle sales soared 10.7% in the first quarter led by higher sales of F-series, Mustang, Bronco, and commercial vehicles. The company’s F-series trucks have been America’s best-selling truck for 46 years in a row and now it is banking on its all-electric avatar – the F-150 Lightning to drive sales.

Ford was America’s best-selling car brand in Q1 2023

In his prepared remarks, Andrew Frick, vice president of sales distribution, and trucks said, “Ford is off to a fast start to the year. Ford’s sales growth and investments are a direct result of strong customer demand across our truck, SUV, and electric vehicle segments. And this year’s highly anticipated new product launches with Super Duty, Escape, Mustang and Ranger, will only add to this momentum.”

Ford gained market share in the quarter and outsold General Motors which has historically been the largest automaker in the country.

Ford’s EV sales trailed in the quarter

Meanwhile, Ford’s EV sales fell on a sequential basis in the quarter to 10,866 of which 4,291 were the F-150 Lightning. The company lost five weeks of production for F-150 after it shut production due to a battery issue with the model.

It also took downtime at the Mexico plant that produces the Mach-E to retool it for higher EV production. The plant would have an annual production capacity of 210,000. Ford also said that it is on track to reach annualized production run rate of 150,000 for its F-150 Lightning.

The model’s success would be crucial for Ford as the F-series trucks are believed to account for the bulk of the company’s profitability.

Ford raised F-150 prices

While Ford slashed the prices of its electric Mach-E earlier this year, it recently raised F-150 Lightning prices. The pickup segment hasn’t yet seen the kind of competitive pressure as sedans and SUVs where there has been a price war, largely driven by Tesla.

Tesla slashed prices across models earlier this year which helped propel the company’s first-quarter deliveries to a record high.

Tesla’s deliveries reached a record high in the first quarter

Tesla produced 440,808 cars in the first quarter and delivered 422,875 of these. While production rose 44% deliveries rose only 36% YoY. For the last many quarters, Tesla’s deliveries have trailed production.

Importantly, the deliveries of Model S/X were only 10,995—which is way below the 19,437 that it produced. The share of Model S/X in Tesla’s sales mix has anyways been on a downward trajectory and in Q1 2023, accounted for only about 2.5% of the total deliveries.

During the Q4 2022 earnings call, Tesla said that it expects to produce 1.8 million cars in 2023 which is a YoY growth of just around 31%. During the earnings call, Tesla’s CEO Elon Musk said that while its internal production goal is 2 million cars, it is providing conservative guidance.

Ford expects to hit a 2 million EV production run rate by 2026

Ford meanwhile expects its annual EV production run rate to hit 2 million by 2026. It is targeting an annualized production capacity of 600,000 by the end of this year. The company was the second-best-selling EV brand in the US in the fourth quarter but fell to fifth rank in the first quarter of 2023 on account of production loss.

General Motors, which is targeting an annualized production capacity of 1 million EVs by 2025 was the second-best-selling EV brand with sales of 20,670 vehicles.

However, Tesla is the market leader by a wide margin. While the Elon Musk-run company does not report sales by region, Motor Intelligence estimates that it sold 161,430 cars in the US in the first quarter.

Tesla is targeting an annual production of 20 million

Tesla has set itself a target of producing 20 million cars annually by 2030. To put that in perspective, Toyota, the world’s largest automaker, sold just over 10 million cars in 2022. Tesla expects to produce around 1.8 million cars in 2023 and said that it has the capacity to produce as many as 2 million cars.

To achieve the goal of 20 million deliveries, which amounts to a CAGR of over 41% between 2023 and 2030, Tesla might need to build many more Gigafactories. In the past, Musk said that the company would need over a dozen Gigafactories to reach that goal.

Currently, it has four plants of which two, Berlin and Austin, are in the process of ramping up production and has announced another Gigafactory in Mexico.

Ford is investing to enhance its EV capacity

Legacy automakers are also ramping up production and both Ford and General Motors are investing billions of dollars to enhance their EV production. Volkswagen has also stepped up its game in the EV space and is targeting a 10% US market share by the end of this decade which is over twice the current share.

EV competition is set to intensify in the coming months which might only escalate the price war. Pricing pressure would meanwhile increase the troubles for startup EV companies that are posting losses.

Ford to report EV results separately

Ford would now report the results of its EV business which it has rechristened Model e separately from the legacy ICE (internal combustion engine).

Last month Ford said that its EV business lost $2.1 billion in 2022 and predicted that losses would swell to $3 billion this year. It expects the business to turn profitable only by the end of 2026.

At an event last month, the company’s CFO John Lawler said, “As everyone knows, EV startups lose money while they invest in capability, develop knowledge, build (sales) volume, and gain (market) share.”

Ford expects EV business to report a $3 billion loss in 2023

Notably, Tesla was also barely profitable in its initial years but has posted profits in every quarter since Q3 2019. The company boasts industry-leading margins.

However, its margins might come under pressure in the coming pressure amid aggressive price cuts.

As for Ford, the company would look to fund its EV losses with the profitable ICE business which is now known as Ford Blue. The company’s third business segment Ford Pro would look after the commercial vehicle business.

Ford became the first legacy automaker to separately report earnings of its EV business but analysts expect other automakers to also follow suit as their EV business gains traction.