TLDR
- Ford reported better-than-expected Q1 earnings with revenue of $40.66 billion, but faces challenges ahead
- The company expects a $2.5 billion tariff impact in 2025, planning to offset $1 billion through internal measures
- Ford is raising prices on Mexican-built vehicles like the Mustang Mach-E, Maverick, and Bronco Sport by up to $2,000
- President Trump questioned whether Ford’s price increases would be viable, suggesting consumers won’t accept them
- Ford did not issue forward guidance, reflecting uncertainty about future performance in the tariff environment
Ford Motor reported earnings that exceeded expectations on May 5, with the stock jumping nearly 3% the next day. The automaker beat forecasts with revenue of $40.66 billion and earnings per share of 12 cents, compared to analysts’ predictions of $35.99 billion and negative 2 cents, respectively.
But the good news may be short-lived. The stock faces resistance near its 2025 high, and tariffs are casting a shadow over the company’s outlook.
Ford expects a $2.5 billion tariff impact in 2025. The company plans to offset $1 billion through internal measures like cost reductions and logistical changes.
This still leaves a $1.5 billion hit to Ford’s 2025 earnings before interest and taxes. The company did not issue forward guidance, adding to investor uncertainty.
Tariff Impact and Price Increases
The Trump administration’s 25% tariffs on imported vehicles and auto parts are affecting all automakers. Ford claims it will be less impacted because it produces 80% of its U.S.-sold vehicles at American assembly plants.
However, Ford still imports parts and assembles some of its most affordable vehicles in Mexico. The Bronco Sport SUV, Maverick compact pickup, and Mustang Mach-E are built south of the border.
The company is now raising prices on these Mexican-built vehicles. According to Reuters, prices will increase by up to $2,000 on some trim levels.
Ford has confirmed these pricing changes but pointed out that promotional pricing will be available through the July 4 weekend. The company is also offering employee pricing through June 2, making vehicles available below invoice prices.
Trump’s Response to Ford’s Move
President Donald Trump questioned whether Ford’s price increases would go through. “They are saying that just to try to negotiate deals with me,” the president said during an announcement about a trade deal with the U.K.
“If Ford [raised prices], they wouldn’t sell any cars,” Trump added. He suggested that U.S. consumers won’t bear the cost of tariffs, arguing that car companies and other countries will pay instead.
This view contradicts the position of car companies, Wall Street analysts, and economists, who expect manufacturers to pass tariff costs to consumers to protect their profit margins.
The U.K. trade deal announced by Trump includes lower tariffs on cars imported from Britain and vehicles sold there. This could benefit all automakers, including Ford.
Consumer Impact and Lending Practices
Ford CEO Jim Farley made a notable comment in a CNBC interview after the earnings report. He stated that 84-month auto loans were “perfectly rational.”
This remark is important as vehicle prices rise. In the past, many consumers avoided 60-month loans. Today, 72-month loans are common, especially for those with fair or poor credit.
Extending loan terms would allow consumers to “absorb” higher vehicle costs. If tariffs raise imported vehicle prices by up to $5,000 as Farley suggested, consumers will face difficult choices.
Market Reaction and Outlook
Investor sentiment toward auto stocks remains mixed. Ford stock closed flat at $10.28 on May 8, while General Motors and Stellantis saw gains of 4.1% and 4.7%, respectively.
Since the November 5 election, Ford stock has dropped about 3%. GM and Stellantis have fallen more sharply, down about 15% and 32%, respectively.
Analysts have mixed views on Ford following the earnings report. The consensus price target of $9.87 would be 5.5% lower than the stock’s closing price on May 6.
The first quarter may have seen many consumers front-loading their purchase decisions for new vehicles. This suggests Q1 could be the high point for revenue this year.
Even with the better-than-expected results, Ford’s Q1 revenue was still 4.9% lower compared to the same period last year.
Ford’s 5.74% dividend yield and annual payout of 60 cents per share add complexity to investment decisions. With earnings under pressure, a dividend cut isn’t out of the question.
The company is still paying the United Auto Workers $8.8 billion through 2028. When this deal was signed, Farley called the costs unsustainable and warned they could make Ford a bankruptcy risk.
For now, Ford continues to navigate the challenging tariff landscape. The U.K. trade deal offers a glimmer of hope, but pricing pressures and consumer reactions will determine the road ahead.
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