In early October, Ford Motor Company's new CEO, Jim Farley, pledged to increase transparency by returning to monthly sales reporting, hoping to provide investors with a clearer picture of the company's performance. However, the most recent sales report has highlighted serious challenges. Following the announcement, Ford’s stock took a significant hit as underwhelming sales numbers and bloated inventory levels raised red flags for analysts and shareholders alike. Dealerships are now overflowing with inventory, particularly of the F-150, Bronco, and Mach-E models, straining already limited space and resources. Rows of unsold vehicles fill dealership lots, reflecting deeper issues in Ford’s strategy and market response.
Inventory backlogs increase discount urgency
The inventory problem has become particularly evident with the Bronco SUV, which was a hot commodity only a year ago but now sits in high supply with a price tag reaching $98,000 for premium models. Consumers are hesitant to commit to such high prices, especially as economic pressures push them to reconsider major purchases. This pricing barrier has left Ford’s high-end models gathering dust on dealership lots, forcing dealerships into "panic mode." Pressure from competitors, such as Ram, which faces similar inventory and pricing issues, has only heightened the urgency for Ford to offer significant discounts. As a result, Ford is initiating a price war across dealerships, a strategy that could further compress profit margins.
The Electric Vehicle (EV) Profitability Crisis
Ford's electric vehicle (EV) division is another area of concern. Despite global efforts to push EV adoption, Ford’s EV lineup is struggling financially, reporting a staggering $1.22 billion loss in the third quarter. This equates to a per-unit loss of about $37,500, underscoring the challenges Ford faces in making its EV offerings profitable. The high cost of its EV truck, the F-150 Lightning, which carries a sticker price of around $88,000, has diminished consumer interest. Production of the Lightning has been halted, with layoffs following suit, reflecting the reduced demand and financial strain of maintaining high EV production.
Price increases discourage consumers
Meanwhile, the Ford Explorer, an SUV popular among families, now carries a price tag of nearly $50,000 when fees are included. Such price hikes have made even Ford’s mainstream vehicles less accessible to the average consumer. With the market for affordable family vehicles shrinking, Ford’s high-priced inventory is meeting resistance, even from loyal customers.Compounding the situation, AutoNation, one of the largest automotive retail groups in the U.S., recently sold five Ford dealerships, an action that has been interpreted as a lack of confidence in Ford’s current business model. AutoNation’s decision is especially noteworthy, as it reflects a broader sentiment within the industry that Ford’s approach may be misaligned with market needs and consumer demand. Additionally, Ford recently announced a large recall affecting more than 100,000 F-150 trucks due to rear axle concerns, adding to the company’s quality control and public perception challenges.
Ford's financial division, Ford Blue, also reported a profit decline of 5.3% in the most recent quarter. Across the country, dealerships are forced to offer heavy incentives, including price reductions and low-interest financing, to move stock off the lot, which in turn pressures Ford's bottom line. The costly accumulation of inventory poses an ongoing financial strain, especially as consumers increasingly resist the rising prices across Ford’s lineup.
The imbalance in inventory also reveals a disconnect in Ford’s production strategy. Dealerships have an ample supply of F-150s, a model with higher profit margins for Ford, but affordable models like the Ford Maverick, which retails for $25,000–$30,000, are notably absent. The lack of these budget-friendly options suggests Ford’s emphasis on profitability may be overshadowing the needs of both consumers and dealerships, which depend on high-turnover, reasonably priced vehicles to maintain cash flow and keep customers engaged.