It's a real blow.
The blow is so powerful that it will take several minutes for consumers to recover.
Last month the automaker warned that it had been unable to deliver between 40,000 and 45,000 vehicles promised to its dealers during the third quarter due to a lack of parts.
Ford p added that suppliers had also raised their prices, which was to affect its profits.
"Based on recent negotiations, inflation-related supplier costs during the third quarter will run about $1 billion higher than originally expected," the legacy carmaker said.
In the short term, this will eat into profit at the company, which now anticipates third-quarter adjusted earnings before interest and taxes in the range of $1.4 billion to $1.7 billion. This is well below the $3.7 billion in adjusted EBIT Ford reported in the second quarter.
But it was also a signal that the car manufacturer will decide to pass on this additional and unexpected cost increase to consumers in the form of higher vehicle prices. And that's what just happened.
Additional Price Increases
Ford has decided to increase the prices of the F-150 Lightning, the electric version of its best-selling F-150 pickup.
The base price of the F-150 Lightning will increase by $5,000 for 2023 model year vehicles. Consumers should therefore pay from roughly $52,000 to $97,000 depending on the version. For 2022 model year vehicles, base prices ranged from $40,000 to $92,000. These prices obviously exclude taxes, delivery and other charges.
The base price of the F-150 Lightning Pro, the model intended for professional customers - businesses, government - will increase by almost 11% to $51,974. The increase is even more spectacular if we refer to the very first vehicles in May 2021. These cost $39,974.
Price increases do not affect customers who have already placed their order.
This is the second time in just over a month that Ford has raised prices for the F-150 Lightning. On August 9, the manufacturer had increased the prices of the truck/pickup between $6,000 and $8,500 depending on the model.
The base price of the F-150 Lightning model year 2023 thus climbed between $47,000 and $97,000, compared to approximately $40,000 to $92,000 for model year 2022 vehicles. These prices obviously exclude taxes, delivery and other charges.
As in August, Ford attributed further price hike to costs related to continued disruptions affecting supply chain
The supply chain disruptions have been exacerbated by the covid-19 pandemic and the microchip shortage. These two problems together have forced automakers to temporarily suspend production of some, often very popular, models. They also reduced the inventory of new vehicles.
At the beginning of the year, the easing of the pandemic in several regions of the world gave hope that things would finally get back to normal, but that was without counting on the invasion of Ukraine by Russia. This unprovoked war caused the prices of the raw materials needed to assemble certain cars, such as electric vehicles, to skyrocket.
The cost of battery development has more than doubled since the coronavirus pandemic, research firm AlixPartners has calculated. This increase in costs is due to the disruptions caused to supply chains by the pandemic and the soaring prices of raw materials following the invasion of Ukraine by Russia.
The costs of the raw materials (cobalt, nickel, lithium) necessary in the development of an electric vehicle have on average increased by almost 144% in two years to $8,255 as of last May, according to a report published in June by AlixPartners. As of March 2020, these costs amounted to $3,381. The cost of developing the electric vehicle has increased by about $2,000 over the past two years, the research firm added.
Huge Impact on Consumers
All of this is very bad news for consumers.
A growing share of Americans are committing to monthly new car payments topping $1,000 as interest rates and prices continue to rise, according to Edmunds.com. 14.3% of consumers who financed a new vehicle purchase in Q3 2022 committed to a monthly payment of $1,000 or more, the highest level that Edmunds has on record.
More than 1 in 4 consumers who financed an EV committed to a monthly payment over $1,000, the study found.
"Despite worrisome macroeconomic conditions, Americans are spending more money than ever on new vehicle purchases,” said Jessica Caldwell, Edmunds’ executive director of insights. "Ongoing inventory shortages are partly to blame, but this trend is also a reflection of consumer preferences."