Why Ford's EV Sales Could Hit a Speed Bump

When it comes to the global automotive industry, all signs point to an electrified future. Already, China's automotive market is testing 50% market share of electrified vehicles, but electric vehicle (EV) sales progress has been slower to gain traction in the U.S. market.

For Ford Motor Company (NYSE: F) investors, the company's recent EV sales growth is about to hit a speed bump thanks to its popular Mustang Mach-E. Here's what's going on.

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More recalls

Ford has had a rougher time with recalls than many of its competitors recently. The Detroit icon is no stranger to leading in recall volume, and in the past it's dinged the company's bottom line and hindered profitability. Not all recalls are created equal, and issues that can be fixed with over-the-air updates can be considerably cheaper than having customers bring in their vehicles for a hardware fix.

Unfortunately, the recent recall for Ford's Mustang Mach-E could be a little problematic. The automaker issued a global recall for roughly 317,000 Mustang Mach-E vehicles due to a malfunction that could cause drivers to be locked in or out of their vehicle, leaving a potentially dangerous scenario if a person were unable to exit the vehicle.

Ford's Mustang Mach-E. Image source: Ford Motor Company.

On the bright side, Ford noted that so far no injuries or accidents have been linked to the defect, and that it's currently working on a software fix that will be available during the third quarter. Here's the kicker, though: Ford issued a stop sale for all Mustang Mach-E vehicles until the issue is fixed.

For investors, that likely means a dip in EV sales in the near future. Year to date through May, Ford's Mustang Mach-E posted a modest 2.8% gain over the prior year -- far ahead of the gasoline-powered Mustang, which recorded an 18% drop in sales. Meanwhile, Ford's total electrified vehicle sales were up 18%, driven largely by a 31% uptick in hybrid vehicle sales.

Losses mount

The problem is that the vast majority of EVs currently aren't profitable, and losing what little scale Ford has built due to the stop-sale pause on the Mustang Mach-E isn't going to help matters. Consider that Ford's Model-e business segment lost $4.7 billion in 2023 before losing almost $5.1 billion during 2024.

This all comes at a time when Ford is already dealing with tariff headwinds and the strategies necessary to offset added costs. While Ford believes it can offset some of the tariff impacts, it still sees a net negative impact of roughly $1.5 billion in adjusted earnings before interest and taxes (EBIT) for 2025.

For current investors, Ford remains well-positioned with a healthy balance sheet boasting roughly $45 billion in liquidity, including $27 billion in cash. That liquidity can easily support Ford's increasingly lucrative dividend which sits at a current yield of 7%. The company remains committed to returning 40% to 50% of free cash flow to shareholders. But for new investors, there's enough uncertainty and headwinds facing Ford to watch the automaker from the sidelines in 2025.

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Daniel Miller has positions in Ford Motor Company. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.