Ford’s electric vehicle (EV) ambitions are surpassing the current demand, as indicated by the company’s sales numbers, EV supply, and dealer sentiment. Ford seems to be facing a challenge of having more Mustang Mach-E and F-150 Lightning pickup trucks than it can sell. In the second quarter of 2022, Ford dealers were able to sell 86.4% of their Mach-E inventory within 30 days. However, this figure dropped to 27.7% in the same period of 2023, even with double the inventory. Ford’s second-quarter sales of the Mach-E fell by 21% compared to the previous year. Similarly, sales of the Lightning appear to be slowing down, with only 39.3% of inventory sold within 30 days in 2023, compared to 70% the previous year.
Despite the challenges, Ford’s overall EV sales have increased by nearly 12% through June. However, a significant portion of unsold Mach-E inventory is still in transit, with approximately 52% awaiting delivery. The Lightning’s deliveries have increased this year, but the sales rate seems to be slowing. Ford aims to produce 600,000 EVs this year, but it expects to incur losses of at least $3 billion in the process. The profitability of the EV segment is not expected for another three years, especially considering the substantial losses per vehicle sold. Additionally, the requirement for dealers to become “EV certified” by investing significant amounts has discouraged some dealers from selling EVs.
Dealers have expressed concerns about Ford’s production rate not aligning with customer demand. Some dealers have declined EV allocations due to what they perceive as excessive production. The allocation of EVs from Ford’s assembly plants is based on dealer needs and market demands, but it has become a point of contention among dealers, leading to lawsuits claiming violations of franchise laws. Other automakers, including Tesla and GM, have also struggled to match EV production with demand. The EV market is experiencing growing pains as it moves beyond the early adopter stage, with industry analysts predicting challenges ahead.
Despite more than 200,000 reservations for the Lightning, some orders remain uncompleted for extended periods. This delay gives order holders the opportunity to consider alternative EV options, potentially leading to difficulty in converting reservations into actual sales. The Midwest dealer raises concerns about the arrival of these delayed Lightnings on dealer lots, as customers may have already purchased other EVs while waiting for their orders to be fulfilled.
As the US car industry approaches EV sales accounting for 10% of the market, it faces a plateau in growth. Analysts suggest that there may be a natural resistance between 7% and 10% of market share, making further growth more challenging. Despite these obstacles, the industry continues to invest billions of dollars in electrification, emphasizing the long-term commitment to EVs and the belief that demand will eventually catch up to production capabilities.
Source: Business Insider