Ford is among the oldest automobile makers that are still operating today. Ford made around 92 percent of its total revenues in 2019 through sales to automotive companies. In Q2 2020, U.S. total sales fell by 33.3 percent yearly. Of the 433,869 cars it sold across the U.S. during the quarter, 54.8% were trucks, 34.9% were SUVs, and the remaining 10.3% were cars.
A distant second in the top spot for Ford in revenue production is its Ford Credit division which accounts for approximately 7.8 percent of all revenue in 2019. The business's credit division mostly focuses on the finance of Lincoln and Ford vehicles across the U.S., as well as helping finance dealerships financially.
The final portion of the revenues ($43 million) is derived from the Ford mobility segment. This segment of Ford's business strategy involves Ford developing, expanding, and investing in new mobility solutions across the globe like autonomous vehicles and self-driving software.
Ford's Business Segments
Ford operates in 3 business units: Automotive, Mobility, and Ford Credit. Ford breaks down revenues in addition to modified EBIT per segment. EBIT is a measure of profitability calculated by dividing revenue by expenses, excluding interest and taxes. Furthermore, Ford reports corporate governance expenses, interest income, losses, and gains arising from investments in a fourth category called Corporate Other, even though it is not considered an operating segment.
Automotive
Ford is the largest contributor to its revenues by selling cars, service components, and other accessories across the globe through its Ford and Lincoln brands. The automotive segment comprises profits and expenses related to vehicle manufacturing, development distribution, service, and electrification programs. The company also offers wholesale sales of vehicles to distributors and dealers in five major geographic segmentations: North and South America, China, Europe, and International Markets Group.
With revenues for Q2 2021 of $24.1 billion, the automotive segment of Ford was responsible for 90.2 percent of revenue in the second quarter of 2021. Automotive revenue increased by 45.1 percent YOY during that quarter, which is the second fastest among Ford's three operating divisions. The Automotive segment posted an operating loss in the second quarter of 2021, as measured by EBIT adjusted, of 95 million dollars. It was an impressive increase from -$2.1 billion EBIT during the same quarter one year prior.
In the quarter ended in 2021, Ford's adjusted EBITs of the Automotive segment across North America and the International Markets Group were both positive; however, the adjusted EBIT of the Automotive business within South America, China, and Europe were all negative. Together, Automotive adjusted EBIT for South America, China, and Europe was -$493 million in the quarter.
Mobility
Ford's Mobility division includes costs for creating and producing self-driving vehicles. The segment is also Ford's equity share control of Argo AI, a developer of autonomous driving technology, along with investments in Spin Micro-mobility Service, a micro-mobility services provider.
Mobility is among Ford's tiniest segments in terms of revenue. It accounted for just $21 million in revenue for the second quarter of 2021, about 0.1 percent of the total quarterly revenue. The segment was among the top-performing in terms of revenues, with revenue increasing by a third for the period, but that growth was based on an extremely modest base. Mobility reported an adjusted EBIT of -182 million for the quarter ending in 2021. This significantly improved over -$286 million during the same quarter the year before.
Ford Credit
The credit segment comprises the company's financing for vehicles and leasing activities. Ford Credit offers a wide range of automobile financing services for dealers and customers worldwide. Ford Credit's business involves financing automobiles, assisting dealer operations, and leasing contracts.
Ford Credit posted quarterly revenue of $2.6 billion for the second quarter of 2021, which is approximately 9.7 percent of its total revenues. The figure was lower by 5.0 percent YoY, making Ford Credit the only one of the operating segments to report declines in revenue YOY during the period. However, Ford Credit generated an adjusted EBIT of $1.6 billion in the second quarter of 2021, which was nearly triple in YOY as it profited from the rise in sales of cars as compared to the same period a year ago.
The segment was also the sole operating one that reported positive adjusted EBIT during the quarter. During the period, Ford Credit benefited from a historically LTR ratio that reflects lower losses and strong net recoveries. Ford Credit's U.S. auction values were also 39% higher than a year ago, indicating a strong demand for second-hand cars.
