The Zhitong Finance App learned that at a time when the plug-in car market was slowing down, Ford Motor Company (F.US) quickly adjusted its electric vehicle strategy. Thanks to strong work truck sales, the company's first-quarter results beat market expectations.

Ford Motor's first-quarter revenue was $42.8 billion, exceeding analysts' expectations of $40 billion; adjusted earnings per share were 49 cents, higher than analysts' average estimate of 42 cents.

Strong sales of recently redesigned Super Duty pickups boosted Ford's performance, and its commercial division, Ford Pro, saw a 36% increase in revenue and an increase in profit margins.

Ford's CFO John Lawler said: “We have had a very strong quarter.” “Looks like we're going to have a very solid year ahead.”

As electric vehicle sales growth stalled, Ford CEO Jim Farley cancelled aggressive electrification plans in favor of producing more SUVs and pickups to fund future growth.

Farley delayed the launch of two battery-powered models and drastically cut the price and production of electric vehicles, while increasing production of fuel-fuel models such as the Bronco sports utility vehicle, as well as production of oil-electric hybrid models such as the Maverick mini truck.

According to reports, the automaker will also switch to producing smaller, more affordable electric cars, which are expected to hit the market by the end of 2026. Lawler said on Wednesday that these new products will be profitable from the day they go on sale.

“We have to make huge progress on the Model e,” Farley said during Ford's earnings call. “This is a major drag on the entire company right now.”

Ford reiterated its estimated profit before interest and tax of US$10-12 billion this year, and said it is trending towards the higher end of this range. The company also raised its free cash flow forecast to $6.5 billion to $7.5 billion.

Earlier this week, Ford's competitor General Motors (GM.US) announced results that surpassed market expectations. Both companies are benefiting from strong demand for traditional gasoline-powered models. Tesla (TSLA.US), the leader in the US electric vehicle market, reported lower than expected earnings on Tuesday, reflecting a slowdown in global demand for all-electric vehicles.

Cut costs

In the short term, Ford is offering significant discounts on existing electric vehicles as inventory of its F-150 Lightning plug-in pickup and Mustang Mach-e electric SUV surges.

Lawler said Ford will cut costs by 2 billion US dollars “as planned” this year, which will help offset losses of up to 5.5 billion US dollars in the electric vehicle business this year. Initiatives include improving quality to reduce warranty costs by billions of dollars.

For additional quality checks, Ford produced more than 60,000 newly designed F-150 pickups, which left the company's free cash flow of negative $500 million in the first quarter. Farley said these inspections also enabled Ford to avoid 12 recalls.

Electric vehicle losses

Losses in Ford's electric vehicle business and struggles to control costs overshadowed the strong performance of its commercial division Ford Pro and the profits of its Ford Blue division, which sells traditional internal combustion engine vehicles. The company's stock price has always lagged behind GM and Stellantis.

Ford's electric vehicle division, Model e, lost $1.32 billion before interest and tax in the first quarter, better than analysts' previously anticipated loss of $1.36 billion. Ford's electric vehicle sales in the US increased by 86% in the first quarter of this year, but the company closed two electric vehicle factories in the same period last year. Compared to the fourth quarter of last year, Ford's electric vehicle sales fell 22% in the first three months of this year.

Joel Levington, head of credit research at Bloomberg Intelligence, said, “It is estimated that by 2024, each Model e will lose about $33,000, which is about 17% higher than in 2023.” “Reducing investment, sales, and possible cost cuts could create a 'less bad' situation.”

Pro business profit

Ford's commercial division Ford Pro's profit before interest and tax was $3 billion, far higher than analysts' average estimate of $2.24 billion. The division's profit margin before interest and tax was 16.7%, up from nearly 10% a year ago.

The carmaker has been more successful in selling electric vehicles to fleet buyers, who have found that electric vehicles save money due to lower fuel and maintenance costs.

Lawler said: “When you look at Ford Pro, you know it's been a fantastic quarter. The profit is double that of last year, and the growth rate is unbelievably high.”

Ford Blue's traditional business, which includes internal combustion engine vehicles and oil-electric hybrids, had a profit before interest and tax of $905 million, lower than analysts' expectations of $1.63 billion. Ford's total light vehicle sales in the US increased 7% in the first quarter of this year due to strong market demand for hybrid vehicles, which surged 42%.

Sales of Ford's best-selling F Series truck fell 10% in the first quarter during the quality inspection period. This month, Ford resumed delivery of the electric F-150 Lightning, which had been fixing undisclosed quality issues for nearly three months.

As of press release, Ford rose 2.39% to $13.26 after the market. The stock has risen more than 9% since this year.