Amid recalls, Ford says cost to build Mustang Mach-E is skyrocketing

Amid recalls, Ford says cost to build Mustang Mach-E is skyrocketing

Amid recalls Ford says cost to build Mustang Mach E is

According to the automaker’s chief financial officer, Ford Motor is bracing for an economic downturn despite steady consumer demand for new vehicles.

Though Ford is posting record profits and strong demand for electric vehicles like the Mustang Mach-E, rising battery material costs and inflation are wiping out any potential gains for the new car, Ford CFO John Lawler said Wednesday at a conference hosted by Deutsche Bank and by CNBC reports. This is despite a recent Mach-E price hike to offset the effects of inflation.

Lawler said the vehicle price increase was enough to preserve Ford’s profit margins, but not enough to impact increased raw material costs. While the CFO didn’t share how much money Ford loses on each Mach-E purchase, he said the cost of the EV increased by $25,000.

This news comes as Ford is in the process of recalling nearly 49,000 Mach-Es over a malfunction that could cause the vehicle’s battery high-voltage contactors to overheat, resulting in a power outage while driving and causing an accident. The company said a simple over-the-air update will fix the problem, but if the recalls got any more complicated, it could cost the company millions.

Roadblocks like these call into question whether Ford and other automakers producing electric vehicles at a rapid pace will be able to meet production and delivery targets over the next few years. In April, Ford had to stop new orders for the Mach-E 2022 because demand could not be met due to semiconductor and parts shortages. The previous month, the automaker had increased its EV investments to $50 billion by 2026 and announced it would operate its EV unit as a separate entity from its internal combustion engine business.

We see challenges in fulfilling obligations not only on the side of the car manufacturers. Customers are paying later and later to Ford Credit, the automaker’s vehicle financing arm, Lawler said, noting it’s another sign of headwinds.

Ford is serious about a possible US recession and is prepared to follow several different approaches to past recessions, Lawler said.

“We are very economical with our inventories. We have an impressive backlog of over 300,000 units,” Lawler said. “As an industry and as a company, we are heading towards this [possible recession] in a very different position than ever.”