Ford Motor Company is set to increase the price of its Mustang Mach-E electric vehicle (EV) by up to $2,000 for the 2025 models, attributing this decision to new tariffs on imported vehicles and parts from Mexico and Canada. This price hike comes at a time when the Mach-E has already struggled with sales, with only 11,607 units sold in the first quarter of 2025, according to 24/7 Wall St.
The increase in price will also affect other models, including the Maverick pickup and Bronco Sport, with the higher prices applicable to vehicles built after May 2, 2025. A confidential memo reviewed by The Wall Street Journal confirmed these details, highlighting that Ford anticipates a $1.5 billion reduction in adjusted earnings before interest and taxes (EBIT) this year due to the tariffs.
Ford's CEO, Jim Farley, indicated that the tariffs, introduced under the Trump administration, could persist for several years, potentially raising vehicle prices by as much as $5,000. This is particularly concerning for the automaker, which has already faced challenges in selling its EVs and has suspended its annual financial guidance due to the ongoing uncertainty surrounding these tariffs.
In the first quarter of 2025, Ford reported an earnings per share (EPS) figure of 14 cents, a significant drop from 49 cents a year earlier, but still above analysts' expectations of just 2 cents per share. The company's revenue fell by 5 percent to $40.7 billion, although it exceeded analyst forecasts of $36 billion, buoyed by strong vehicle sales as consumers rushed to buy before potential price increases.
Ford is not alone in grappling with the financial impact of tariffs. General Motors (GM) has revised its 2025 earnings forecast downward by $4 to $5 billion due to similar tariff-related costs. GM has also suspended its $4 billion share buyback program, further illustrating the widespread effects of these trade policies on the automotive industry.
Meanwhile, the automotive landscape is experiencing significant shifts. A recent trade deal between the U.K. and the U.S. allows British automakers to export up to 100,000 vehicles annually at a reduced tariff rate of 10 percent. This deal, announced on May 8, 2025, is expected to provide some relief to the U.K. automotive sector, which exported approximately 102,000 vehicles to the U.S. in 2024.
In contrast, Ford's price increases on its Mexico-produced models, including the Mach-E, reflect the immediate challenges posed by the tariffs. The base model Mach-E's MSRP stands at $37,995, while the four-wheel drive version costs $38,685, and the GT model starts at just over $54,000. Despite these price increases, Ford faces skepticism from consumers regarding EVs, particularly concerning the availability of charging stations, range issues, and performance in cold weather.
As Ford navigates these turbulent waters, the company has also halted automotive exports to China but will continue to import the Chinese-built Lincoln Nautilus. This decision underscores the complexities of global supply chains and the impact of tariffs on international trade.
Analysts project that the average price of new vehicles in the U.S. could rise significantly, potentially exceeding $50,000 as manufacturers pass on increased costs to consumers. The used-vehicle wholesale prices have already seen a marked increase, with dealers preparing for supply and demand changes influenced by tariffs. Cox Automotive reported on May 7 that this trend was expected, as dealers bought from auto auctions in anticipation of rising prices.
Ford's struggles in the EV market are compounded by significant losses in its electric vehicle and software segments, which are projected to incur losses of up to $5.5 billion this year alone. This adds to the $10 billion in losses the company has accumulated since 2023, highlighting the challenges faced by traditional automakers in transitioning to electric vehicles.
In light of these developments, Ford's decision to raise prices is seen as a necessary measure to counteract the financial strain imposed by tariffs. However, it raises questions about the long-term viability of the Mach-E and other models in an already competitive market. With consumers increasingly seeking value, the price hikes could deter potential buyers and further impact sales.
As the automotive industry grapples with changing trade policies and market dynamics, Ford's situation serves as a cautionary tale of the challenges faced by traditional manufacturers in adapting to a rapidly evolving landscape. The interplay between tariffs, pricing strategies, and consumer demand will undoubtedly shape the future of the automotive sector in the coming years.
