Stock speculation was trapped, and Ford's net loss in the first quarter exceeded $3 billion

Introduction: For Ford's first-quarter performance, its own car sales are not the most prominent sector, and more variables come from the investment market.

(Text/Pan Yuchen Editor/Lou Bing) A few days ago, Ford Motor announced the results of the first quarter of 2022. According to the financial report data, Ford's revenue in the first quarter was US$34.5 billion (about 230.6 billion yuan), down 5% year-on-year; the company's adjusted EBITDA was US$2.3 billion (about 15.37 billion yuan), adjusted EBIT margin was 6.7%, but the overall net loss was US$3.1 billion (about 20.72 billion yuan), net profit margin was -9%; for comparison, its net profit in the same period last year was US$3.3 billion (about 22.05 billion yuan), with a net profit margin of 9%.

Specific to each market segment, Ford's EBIT in North America in the first quarter was $1.6 billion, down 44.8% year-on-year; the EBIT in the European market was $207 million, down 39.3% year-on-year; and the china region lost $53 million in the first quarter, more than three times the loss in the same period last year.

The decline in sales in the current period is undoubtedly a major factor in Ford's financial decline. Ford sold nearly 970,000 units worldwide in the first quarter, down 9% year-on-year. In addition to the direct impact of the epidemic, unfavorable factors such as rising prices of chips and raw materials have led to a decline in Ford's sales.

In addition, due to the decline in overall product shipments, the proportion of Ford's main source of profit, pickup trucks and large SUV portfolios, also affected the profitability of the automotive business.

Ford also said in its earnings report that the continued shortage of chips affected its production and deliveries in January and February, but still said that production capacity had improved greatly after entering March. Ford President and Chief Executive Officer (CEO) Jim Farley believes that after entering the second quarter, Ford's overall orders situation remained good.

However, for Ford's first-quarter performance, its own car sales are not the most prominent sectors, and more variables come from the investment market.

The market value of holding companies has plunged

As of the first quarter, Ford motor had nearly $29 billion in cash, while working capital reached $45 billion. It is worth mentioning that these funds include the market value of Ford's stake in Rivian, which was worth $5.1 billion at the end of the first quarter.

At the end of last year, however, Ford's Stake in Rivian was worth $10.6 billion. In other words, throughout the first quarter, Ford's investment in Rivian shrank by 52% by market capitalization.

Ford isn't the only company investing in Rivian being "trapped." According to internet giant Amazon's earnings report, its stake in Rivian amounted to 20%, and it lost $7.6 billion in the first quarter of this year due to changes in market capitalization and caused the company to lose $3.8 billion overall.

Founded in 2009, Rivian was once a new american car-making force with Tesla' name, mainly releasing pure electric pickup trucks. But compared to Tesla, which delivered new cars to users more than 10 years ago, Rivian didn't deliver its first new car to customers until 10 years after the company's birth.

Even so, with electrification becoming a megatrend in the automotive industry, coupled with the support of governments for the development of the electric vehicle industry, new forces such as Rivian do not lack the favor of investors. Ford bought a $800 million stake long before The Rivian went public and once planned to work with it to produce electric pickup products.

However, due to the strong equity control desire of the founders of Rivian and the outflow of Ford's independent electric pickup trucks such as the F-150 Lightning, Ford gradually abandoned this OEM model. In September, Ford announced its withdrawal from Theivian board and canceled plans to build cars with Theivian.

Despite this, Ford maintained its investment in Rivian through its shareholdings. As of now, Ford holds a 12% stake in Rivian, which directly affects the company's earnings level.

In November 2021, Rivian landed on the US nasdaq as he wished, raising nearly $12 billion. At the beginning of the listing, Rivian's stock price was once high, reaching a market value of $86 billion on the first day, surpassing the major shareholders Ford and General Motors, and then Rivian's market value exceeded $100 billion, becoming the world's third-largest car company after Tesla and Toyota, and At this time, Rivian had not yet delivered a new car to customers. By comparison, Tesla's market capitalization a year after the IPO is less than $2 billion.

Ford, as a shareholder, also reaped the benefits of the deal: In the fourth quarter of last year alone, Ford earned $8.2 billion through Rivian. Since investing in the stake, Ford has made a total profit in this segment of more than $10 billion.

However, after a brief peak, Rivian's capital markets have fallen like a roller coaster. By the end of last year, Rivian had fallen to around $100. And that's just the beginning of the new power's big dive. In the first quarter of this year, Rivian's stock price slipped to less than $40, and as of the close of U.S. stocks on May 5, Rivian closed at $30.71, with a market value of only $27.7 billion, down more than 70% from its peak.

As the saying goes: the higher you climb, the more painful it hurts. Although a large number of bubbles were created in the capital markets in the early stage, Rivian did not give a performance that met the industry's expectations when it came to specific production deliveries.

According to the financial report data, Rivian only delivered 920 vehicles in the entire 2021; with 1227 deliveries in the first quarter of this year, the company has delivered less than 2200 vehicles in the 13 years since its establishment.

Interestingly, two years before The Rivian went public, Tesla released an electric pickup called Cyberruck, which became direct competitors. After Rivian launched the IPO, Tesla CEO Musk did not forget to mock the former when answering questions from netizens, saying that Tesla has both high sales and high market value, while Rivian, although the valuation is extremely high, did not build a car.

Now Musk's remarks are clearly a slur. But it is worth mentioning that Tesla's own Cyberruck has been released for three years since its release, but it has also been "difficult to give birth", a previous Rivian.

Electrification: Plans can't keep up with the changes

Rivian's big dive has undoubtedly cost Ford a lot, but Jim Farley said Ford has identified and is working hard to address a variety of key issues affecting the company's profitability and business growth.

Rivian was one of Ford's options for transitioning in the direction of electrification, but it's clearly not the only option.

According to Ford's plan, its global electric vehicle production will reach at least 600,000 by the end of 2023, and its annual production of electric vehicles will exceed 2 million by the end of 2026. Correspondingly, the production capacity of power batteries will also be further improved. To this end, on March 2 of this year, Ford announced the establishment of an independently operated automotive business unit to clarify and assign priorities for business operations.

Unlike Rivian, who fell into the "production capacity hell" early, Ford has become the second largest electric vehicle company in the United States after Tesla in 2021 through models such as "electric horse" Mustang Mach-E and pure electric transit, and its market value exceeded $100 billion for the first time in January this year.

In the past year, Ford's cumulative orders for electric vehicles have reached 300,000. Jim Farley said that whether it is bronco, Bronco Sport and Maverick in traditional fuel vehicles, or new energy vehicles such as Music Mach-E and pure electric Transit, these products cover Different price ranges for Ford, meet the market demand of various consumers, and continue to bring considerable orders to Ford.

As an electric version of the American "national god car" F-150 pickup truck, the F-150 Lightning has also been officially put into production at the end of April. Ford said the model, with its reputation as the F-150, has so far received orders for 200,000 units. The Lincoln brand has also recently released the first pure electric concept car, the Lincoln Star.

In the relatively niche European market, Ford plans to launch three pure electric passenger cars and four pure e-commerce vehicles by 2024; by the end of 2026, the sales of pure electric vehicles will exceed 600,000.

Of course, as the world's largest new energy vehicle market and Ford's second largest market outside the United States, China also has important strategic significance for Ford. For more than a year, Lincoln's localization has been Ford's main bright spot in China. In the first quarter of this year, Lincoln China sold nearly 20,000 vehicles, setting a new sales record for the same period. In March this year, Ford launched a number of models such as the new Lincoln Z, the new generation of Mondeo and Lingrui. Ford said in its earnings report that these new cars have received more than expected orders.

As far as electrification is concerned, as the first domestic pure electric vehicle, Ford said that the delivery speed of Music Mach-E in China is also steadily climbing, although the product has not yet released specific data. At the same time, the brand's domestic customer experience and dealer network are also being upgraded with the goal of electrification.

Although Ford said that the company's electrification transformation is in full swing, the above plan still faces challenges brought about by various "black swan" events with the advent of major changes unprecedented in a century. The recurrence of the epidemic, the continuation of the chip crisis, the rise in raw material prices, and the potential oil and supply chain crisis brought about by the situation in Russia and Ukraine are all bringing a continuous and severe test to global car companies, including Ford.

In China, the national epidemic spread led by Shanghai, Jilin and other places in the first quarter, and like most car companies, Ford China is also facing a serious test. In its earnings report, Ford specifically mentioned the tight supply chain caused by the epidemic, and the impact on China's automobile manufacturing industry is still developing dynamically, and said that the company is actively responding to the severe external environment with partners and suppliers.

In addition, Ford also said that due to the need to fight the epidemic, Jiangling Motors has received 5,100 orders for the production of Trans Shun ambulances in the first quarter.

At present, whether it is Ford's performance or transformation plan, it can only be summarized by "the plan cannot catch up with the change". According to Ford's Chief Financial Officer (CFO) Luo Lixiang's forecast, the company's adjusted EBIT in 2022 will remain at $11.5 billion to 12.5 billion; adjusted free cash flow is expected to be $5.5 billion to 6.5 billion; adjusted EBIT margin of 8%, one year ahead of schedule.

Obviously, the above expectations are based on the fact that the epidemic situation is no longer aggravated and the chip supply situation has improved in the second half of the year. According to the plan, Ford will announce its financial results for the second quarter and first half of this year on July 27. Whether the U.S. auto giant will adjust its full-year targets at that time will give the answer.

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