Q32022 Earnings call - adding shifts, '23 tax rebate $3750

[bmwhitetx]

Ford had their Q3 earnings call this week. You can read the entire transcript from Farley here:
Two points I picked up:
1) they are adding a a shift for Mach-E and Lightning "as we speak".
2) he expects certain Mach-E and Lightnings to meet the $3750 critical materials part of the tax rebate for 2023, but it may be less after that as the requirements get stricter in 2024.

Here are the snippets from Farley (emphasis added):

With Ford Model e, we're on track to reach our annual production rate of 600,000 EVs by the end of next year and 2 million by 2026. I'll say that carefully. There is no change to our target. We're adding shifts to the Mustang Mach-E and F-150 Lightnings as we speak, and we're scaling production of E-Transit.
-----
We expect the U.S. Inflation Reduction Act to have a wide range of positive impacts for both our customers and for Ford. What's not yet clear is the degree to which the IRA will drive customer demand versus offsetting our EV investments in growth. So, let me touch on some of the potential benefits of the IRA.

The first opportunity is our largest, the battery production tax credit of about $45 per kilowatt hour. From '23 to '26, we estimate a combined available tax credit for Ford and our battery partners could total more than $7 billion with large step-up in annual credits in '27 as our JV battery plants ramp up to full production. The second benefit is often overlooked. I haven't actually read any one of the media covering this, but it's super important for Ford.

And [there's] that's the commercial EV credit. You know that Ford is the No. 1 commercial vehicle brand in the U.S., and our commercial customers can now claim next year $7,500 per EV vehicle they buy with no restrictions on battery sourcing or manufacturing. Our preliminary estimate is that between 55% and 65% of all of our commercial vehicle customers will qualify.

The third opportunity is retail. Ford EVs and our PHEVs remain eligible for the $7,500 tax credit until guidance is issued at the end of this year. Next year, we believe we'll meet the $3,750 critical materials credit requirement on certain Mustang Mach-E and F-150 Lightning models. In '24, the rules will further restrict this critical materials credit.

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[Maxx]

we believe we'll meet the $3,750 critical materials credit requirement on certain Mustang Mach-E and F-150 Lightning models

some keywords in there.

 

[KevinC]

It's disingenuous of manufacturers not to be more forthcoming about their batteries. They know where their batteries are coming from and they know which models they are in. Some people are still tweaking their 2023 builds to get under the 80k limit, which will mean nothing if their batteries are completely ineligible to begin with. Many will cancel/abandon if the batteries cause even their unicorn pro's to be ineligible for all rebates. Feds need to push manufacturers to list out their battery qualifications as soon as possible.

 

[Fordskeptic]

I am not into more Fed involvement generally, but much more transparency is needed.

 

[Nick Gerteis]

I am not into more Fed involvement generally, but much more transparency is needed.

Correct, from both manufacturers and feds. Only 2 months to go to 2023 and still “waiting on guidance “?

 

[lancersrock]

It's disingenuous of manufacturers not to be more forthcoming about their batteries. They know where their batteries are coming from and they know which models they are in. Some people are still tweaking their 2023 builds to get under the 80k limit, which will mean nothing if their batteries are completely ineligible to begin with. Many will cancel/abandon if the batteries cause even their unicorn pro's to be ineligible for all rebates. Feds need to push manufacturers to list out their battery qualifications as soon as possible.

Part of the the problem is the irs hasn’t listed the ruling on it yet so the manufactures don’t fully know what to expect.

 

[TaxmanHog]

Part of the the problem is the irs hasn’t listed the ruling on it yet so the manufactures don’t fully know what to expect.

Correct, final cut will come after the period for comments closes on November 4th.
https://www.f150lightningforum.com/...comments-on-credits-for-clean-vehicles.12545/

 

[gymgeek]

Part of the the problem is the irs hasn’t listed the ruling on it yet so the manufactures don’t fully know what to expect.

This. Everybody is waiting on the IRS guidelines to have any details around what qualifies. Don't put blame anywhere else yet. Ford can't say anything one way or another yet. It would be a really terrible idea for them to take their best guess and put it out publicly because they may end up being way off from what the IRS comes up with.

 

[KevinC]

IRS guidance isnt going to change where the batteries are from and what models they are in.

 

[gymgeek]

The IRS guidance will provide details on how to determine the what "40% of minerals" or "50% of minerals", etc are calculated though. Bean counters need details like this. There a lots of different minerals in a battery (varying depending on chemistry of course). Like lithium, cobalt, iron, manganese, phosphate, graphite, nickel, etc.

There are a bunch of ways somebody (especially creative accountants trying to say their company's batteries qualify for a big tax rebate) could come up with to determine if a battery has 40% of minerals from a particular country. For example, is it 40% by weight? Is it 40% of the cost? Is it the pack level or cell level? If it contains recycled material, is it the original source that matters or the location where it was recycled? I'm sure others can come up with hundreds more things to include or exclude or account for differently. If every car company was left to their own interpretation of the details, I'd bet ALL batteries will magically qualify if they have any contents from a "friendly" country. This is why the IRS has been tasked with determining the details of how to account for a given % of battery minerals. So every company is playing by the same rules. Now, we just have to wait for the rules to be released so Ford (and others) can see where their batteries land.

 

[Snappy22]

some keywords in there.

I smell another SR vs ER discrepancy.

If ER ineligible, nothing changes due to cost cap limit.
If SR ineligible, gonna be another big blow to the model line.

 

[TaxmanHog]

Don't forget that the DOE has a finger in the process......
https://www.energy.gov/articles/sta...lm-final-passage-inflation-reduction-act-2022

https://afdc.energy.gov/laws/electric-vehicles-for-tax-credit

https://www.jdsupra.com/legalnews/ira-insight-ira-targets-domestic-7304287/

 

[Maxx]

I smell another SR vs ER discrepancy.

If ER ineligible, nothing changes due to cost cap limit.
If SR ineligible, gonna be another big blow to the model line.

I think there will be more SRs that will be eligible for the following reasons:

1 - A percent of a smaller battery requires less material than the same percent of a larger battery. More incentive money can be extracted from Feds with less eligible battery materials.

2 - SR customers are more price sensitive than ER customers and more likely to bail with smaller tax incentive.

That said, it would be nice to know how much you will be paying for something you have already ordered.

 

[greenne]

Ford had their Q3 earnings call this week. You can read the entire transcript from Farley here:
Two points I picked up:
1) they are adding a a shift for Mach-E and Lightning "as we speak".
2) he expects certain Mach-E and Lightnings to meet the $3750 critical materials part of the tax rebate for 2023, but it may be less after that as the requirements get stricter in 2024.

Here are the snippets from Farley (emphasis added):

With Ford Model e, we're on track to reach our annual production rate of 600,000 EVs by the end of next year and 2 million by 2026. I'll say that carefully. There is no change to our target. We're adding shifts to the Mustang Mach-E and F-150 Lightnings as we speak, and we're scaling production of E-Transit.
-----
We expect the U.S. Inflation Reduction Act to have a wide range of positive impacts for both our customers and for Ford. What's not yet clear is the degree to which the IRA will drive customer demand versus offsetting our EV investments in growth. So, let me touch on some of the potential benefits of the IRA.

The first opportunity is our largest, the battery production tax credit of about $45 per kilowatt hour. From '23 to '26, we estimate a combined available tax credit for Ford and our battery partners could total more than $7 billion with large step-up in annual credits in '27 as our JV battery plants ramp up to full production. The second benefit is often overlooked. I haven't actually read any one of the media covering this, but it's super important for Ford.

And [there's] that's the commercial EV credit. You know that Ford is the No. 1 commercial vehicle brand in the U.S., and our commercial customers can now claim next year $7,500 per EV vehicle they buy with no restrictions on battery sourcing or manufacturing. Our preliminary estimate is that between 55% and 65% of all of our commercial vehicle customers will qualify.

The third opportunity is retail. Ford EVs and our PHEVs remain eligible for the $7,500 tax credit until guidance is issued at the end of this year. Next year, we believe we'll meet the $3,750 critical materials credit requirement on certain Mustang Mach-E and F-150 Lightning models. In '24, the rules will further restrict this critical materials credit.

The REAL problem Ford has is not the critical minerals requirement, its the $80k msrp cap which wipes out virtually all of the ER models and makes Ford's most "popular" trim(Lariat) essentially not eligible for the tax credit.

I say "popular" in quotes because Ford has convinced itself that most people want a Lariat OR at least Ford has been trying to convince people to step up to a Lariat by producing this trim in greater numbers.

This press release has an extremely positive take on a difficult position Ford finds itself in...

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