Ford Faces Crosswinds: Tariffs and EV Losses Dent 2025 Outlook

Ford Motor Company is navigating a storm of headwinds as tariffs and electric vehicle (EV) losses pressure its financial outlook. The automaker’s Q1 2025 earnings report revealed a stark reality: adjusted EBIT fell 63% to $1.0 billion, while its Model e (Battery Electric Vehicle) division posted an $849 million loss. These results, coupled with escalating tariff costs, have forced Ford to suspend its 2025 guidance, leaving investors waiting for clarity during its upcoming Q2 earnings call.

The Tariff Tsunami

President Trump’s auto tariffs—imposed under the Emergency Powers Act—have become a fiscal anchor for Ford. The company now estimates tariffs will cost $2.5 billion gross in 2025, with a net adverse impact of $1.5 billion after mitigation measures. In Q1 alone, tariffs added $200 million to EBIT costs, disproportionately burdening Ford Blue (ICE vehicles) and Ford Pro (commercial vehicles).

The pain is not limited to Ford. A study by the Center for Automotive Research (CAR) projects U.S. automakers will collectively face $41.7 billion in additional costs from tariffs. For Ford, the silver lining is its 79% U.S. vehicle sales sourced domestically—far outpacing GM’s 53%—which limits reliance on tariff-hit imports. Still, delays in reconfiguring supply chains (e.g., shifting aluminum sourcing from Canada to U.S. suppliers) could prolong costs for years.

BEV Losses: A Costly Transition

Ford’s EV division, Model e, is struggling to turn a profit. Q1’s $849 million EBIT loss narrowed from $1.3 billion in Q1 2024, but Ford warns of a $5 billion annual deficit in 2025. Aggressive pricing strategies, like the “Power Promise” campaign (offering free home chargers), and delays in launching new models are exacerbating losses.

While U.S. EV retail sales rose 15% year-over-year, Ford’s Model e revenue growth is offset by margin compression. The postponed launch of its Blue Oval City Kentucky plant (now targeting 2026) further hampers production scale. Executives admit Q1 2025 is likely Model e’s best quarter of the year, with losses widening later in 2025.

Financial Crosscurrents

Ford’s Q1 results were a mixed bag:
- Revenue: $40.7 billion (-5% YoY) but $2.9 billion above forecasts, driven by strong F-Series pickup sales and Ford Pro’s software subscriptions.
- Ford Pro: Generated $15.2 billion in revenue, with 20% higher gross margins year-over-year.
- Ford Blue: EBIT collapsed to $96 million (-90% YoY) due to plant downtime and fleet pricing headwinds.
- Free Cash Flow: Turned negative (-$1.5 billion) amid working capital adjustments, though Ford emphasized this is a temporary dip.

The Path Forward

Ford’s fortunes hinge on two critical variables:
1. Tariff Mitigation: The company aims to offset $1 billion of the $2.5 billion tariff hit through bonded transportation (e.g., moving Mexican-built vehicles via Canada to avoid tariffs), supplier renegotiations, and price increases. Executives are cautiously optimistic about these strategies, though risks remain if tariffs expand or supply chains falter.
2. EV Turnaround: Ford must improve Model e margins by accelerating production of high-margin vehicles like the F-150 Lightning and cutting costs through its U.S. battery plants.

Conclusion: Crossroads for Ford

Ford’s 2025 outlook is clouded by $1.5 billion in tariff impacts and a $5 billion BEV deficit, but its U.S. manufacturing dominance and strong commercial division provide a foundation for recovery. Investors should monitor Q2 results for signs of progress:
- Can Ford’s bonded-carrier strategy reduce tariff costs?
- Will Model e losses narrow as new plants come online?
- How does Ford’s “Handshake Deal” pricing campaign balance short-term sales and long-term pricing power?

With shares down 7% year-to-date and trailing 12-month P/E at 6.2x, Ford trades at a discount to peers like GM (P/E 8.9x) and Tesla (P/E 24.3x). However, until tariff uncertainties fade and BEV losses stabilize, skepticism will linger. The verdict hinges on Q2—will Ford prove it can navigate these crosswinds, or will the storm capsize its recovery?