Ford Is Losing Billions Building EVs
It's no secret that electric vehicle growth in the U.S. market has significantly cratered, presenting a major financial challenge for automakers.
Ford Motor Company has made substantial investments in EV development and battery factories. But the automaker's EV unit, Ford Model e, is reporting huge losses. In the first quarter of 2024, Ford's EV business posted a loss of $1.32 billion–equal to the GDP of a small nation.
And if that wasn't bad enough, Ford Model e also saw a 20% decline in wholesale units and an 84% drop in revenue during the first quarter compared to the previous year. The high costs, particularly for batteries, remain a significant factor. Ford says scaling EV production is essential for reducing these costs.
Unfortunately, the question of EV scale is really just the story of the chicken and the egg repackaged. More scale means more production volume, but that might not mean more customers.
For comparison, Ford's traditional ICE vehicle business, Ford Blue, posted a $905 million boon in the first quarter, which was completely wiped out by the substantial EV losses. The third pillar of Ford's business units, Ford Pro, posted a strong $3 billion gain in Q1, helping to keep Dearborn in the black.
However, Ford can't keep siphoning profits from its other business units to offset EV losses. The company is taking several steps to address the financial strain from its EV segment. Ford has begun reducing orders from battery suppliers to help manage EV losses. Additionally, the company announced that its EV battery factory in Marshall, Michigan, will be smaller than initially planned to reflect the slowing demand.
Ford will also cut $12 billion in spending on battery-powered vehicles, delaying the launch of new EVs, and downsizing its battery factories. Notably, Ford has backed away from its 2021 commitment to go all-electric in Europe by 2030, now stating that it will continue to sell internal combustion vehicles if there is demand. None of this sounds like increasing scale.
Despite these adjustments, Ford anticipates that Model e unit losses could reach up to $5.5 billion, continuing to impact the company's bottom line. While Ford has managed to reduce costs for its EVs, it has also had to lower prices to remain competitive, particularly against Tesla's aggressive pricing strategies. Meanwhile, American consumers are growing increasingly weary of EVs, and for good reason.
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An experienced automotive storyteller known for engaging and insightful content. Michael also brings a wealth of technical knowledge and experience having been part of the Ford GT program at Multimatic and built cars that raced in TCR, IMSA, and IndyCar.
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Here's a thought, how about stripping out all the expensive options and building an affordable base model "work truck"? You know, plastic floor mats, no "infotainment", cloth seats, , etc. In other words, the "Model T" of EV trucks. At least that might preserve all those billions in investment, even if returns are less than optimal.
Does this page not have an editor? Why would you end the article with an open ended statement that raises all kinds of questions like Really?, Is that true? What are you talking about? What reasons?, and then leaves them all unanswered. Is this what happens when AI writes our articles, or is it just bad writing?