Is Ford's Model e Business Dragging Down its Overall Results?

Ford's Model e EV segment continues to struggle, with losses widening from $4.7 billion in 2023 to $5.07 billion in 2024 and $849 million in Q1 2025, driven by pricing pressures, competition, and development costs; the company expects significant EV losses this year. Peers like Toyota and Honda are also exhibiting caution, with Toyota cutting EV production targets and Honda shifting focus to hybrid vehicles amid stunted global EV demand. Ford shares are down approximately 10% year-to-date, underperforming the industry's 11% growth.

Analysis

Ford's dedicated electric vehicle segment, Model e, continues to be a significant financial drag, with losses widening from $4.7 billion in 2023 to an anticipated $5.07 billion in 2024, and a further $849 million loss recorded in the first quarter of 2025. These substantial losses stem from intense competition, particularly pricing pressure initiated by Chinese manufacturers like BYD, coupled with significant ongoing investments in next-generation EV development and infrastructure initiatives such as the Ford Power Promise campaign. While Ford has seen positive customer reception for models like the Mustang Mach-E and F-150 Lightning and plans new launches to boost volumes, the path to EV profitability remains challenging. This cautious sentiment is mirrored across the industry, with Toyota Motor Corporation reducing its EV production target by 20% to 1 million units by 2026 and Honda Motor Co. shifting focus towards hybrid vehicles and cutting EV investment by 30% due to stunted global EV demand. Ford's stock has reflected these difficulties, declining approximately 10% year-to-date, underperforming the industry's 11% growth, although it currently trades at a low forward price-to-sales ratio of 0.25 and carries a Zacks Value Score of A, suggesting potential undervaluation.

Key Decisions for Investors

• Investors should closely monitor Ford's upcoming quarterly results for any signs of improvement in Model e's profitability, given the segment's substantial and widening losses.
• Consider the broader automotive industry trend where competitors like Toyota and Honda are adopting more cautious EV strategies or pivoting towards hybrids, and assess if Ford's continued heavy investment in EVs aligns with evolving market realities and potential returns.
• Evaluate Ford's stock (F) by weighing its current underperformance and the financial burden of the Model e division against its attractive valuation metrics, such as the low forward P/S ratio, and the potential for future volume growth from new EV launches.