Scandals surrounding Ford Motor Company's electric vehicles continue to swirl. This afternoon, the company reported a $1.224 billion loss from its electric vehicle business in the third quarter. In early October, the company reported that electric vehicle sales “grew 14.8%, reaching a record high of 20,962 units sold.”
therefore, Simple division shows the storied automaker lost $58,391 on every electric vehicle sold during the quarter.
The company's electric vehicle business (known as “Model e”) lost a total of US$3.7 billion in the first nine months of 2024.
For reference, The $3.7 billion loss is equal to the gross profit (which Ford calls EBIT, short for earnings before interest and taxes) at Ford Blue, its internal-combustion-engine car-making unit.
Alas, these results are not surprising. Ford has been splashing cash on electric vehicles over the past two years. In 2023, the company will lose $4.7 billion on electric vehicles, and by 2022, the company will lose $2.2 billion on electric vehicles.
The third quarter data once again showed that Ford's leadership made a huge mistake. Chief Executive Jim Farley and his lieutenants don't understand what motorists want to buy.
That's a bad thing when you run one of the largest automakers in the world.
FoMoCo reported a third-quarter loss two months after announcing the cancellation of a planned three-row all-electric SUV.
In August, the company said, “With pricing and margin compression, we have decided to adjust our product and technology roadmap and industrial footprint to achieve positive EBIT within the first 12 months of all new vehicle launches.” goal.
in other words, Ford warned two months ago that it would have to slash prices on electric vehicles and that third-quarter results would be disastrous. Indeed.
Also in August, the company said it would Move some battery production from foreign factories to the U.S. to qualify for more federal subsidies Provided under the Inflation Reduction Act.
As I reported here last year, Ford and other automakers are aiming to raise tens of billions of dollars through a 45x IRA tax credit for companies making batteries in the United States.
For example, Ford is building a battery factory in Marshall, Michigan, that is expected to create about 4,200 jobs. According to Good Jobs First, each job at Ford's new factory will cost taxpayers $3.4 million.
While Ford can claim its sales have increased, The fundamental issues of the electric vehicle market have not changed.
As seen above, credit rating agency Morningstar, which predicted huge growth in electric vehicles 13 months ago, has now turned negative on the sector.
The October 21 issue was titled “Is the electric car short-circuited?” Automakers revise electrification strategies after slowing demand” (Registration required) Morningstar said major automakers including Volkswagen, Ford, General Motors and Mercedes have Electric vehicle plans have been delayed or planned production has been cut due to weak sales.
Morningstar noted that while some automakers, including Ford, have cut prices, this has hurt their profitability. It also said that as sales of electric vehicles “now appear to be exhausted for early adopters, Electric vehicles are struggling to maintain continued sales momentum among mainstream consumers.“
Morningstar then listed the problems that have plagued electric vehicles for decades:
EV range is still significantly affected by extreme weather conditions, with cold weather (i.e. below 40 degrees Fahrenheit) potentially reducing range by approximately 25%. Public EV charging stations have a poor reliability record, fueling concerns about EV charging infrastructure. Furthermore, despite significant developments in recent years, charging times are still much longer than the typical time required to refuel a vehicle with a conventional internal combustion engine.
Additionally, while electric vehicles have fewer parts than internal combustion engine vehicles and generally require less maintenance than internal combustion engine vehicles, One-time repairs, especially when it comes to electric vehicle battery packs, can be very expensive. As a result, insurance premiums for electric vehicles are typically higher than for comparable internal combustion engine vehicles in most jurisdictions, primarily because repair costs can be significantly higher. (Emphasis added.)
This paragraph provides a good summary of the EV market, especially with regard to cold weather, charging infrastructure, and charging times. (For more on the issue of repair costs, see this story from Hertz.) All these problems are evident Since the time of Edison.
So why didn't Ford and other automakers see this disaster coming? Is this a herd mentality? Are they responding to government pressure? If so, why don't they fight back? What do they know about EV demand from market research?
My prediction: In a few years, after automakers have lost billions on bad bets on electric vehicles, business schools and analysts will be asking the same question.
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