How Ford’s Electric Vehicle Strategy Is Losing Money
Ford is one of the most iconic and successful carmakers in the world, with a history of innovation and leadership in the automotive industry. However, when it comes to electric vehicles (EVs), Ford seems to be lagging behind its competitors and losing money on every EV it sells.
Ford’s EV Division: Model e
In March 2022, Ford announced a radical reorganization of its operations, creating two separate divisions: Ford Blue and Ford Model e. Ford Blue would focus on gasoline cars, which are still profitable and popular, while Ford Model e would specialize in battery-powered vehicles, which are seen as the future of mobility.
Ford Model e was supposed to accelerate Ford’s transition to EVs, by investing $50 billion in EV development and production between 2022 and 2026. Ford also launched several new EV models, such as the Mustang Mach-E, an SUV that rivals Tesla’s Model Y, and the F-150 Lightning, the electric version of the best-selling pickup truck in America.
Ford also built two battery plants in Kentucky and a third battery plant and an electric truck factory in Tennessee, to secure its supply chain and reduce its dependence on foreign suppliers.
Ford’s executive chair Bill Ford said that the company had an “extraordinary opportunity” to lead the new era of connected and electric vehicles, and to make a difference for the planet’s health.
Ford’s EV Losses: $60K per Car
However, Ford’s EV strategy has not been paying off so far. In fact, it has been costing the company a lot of money. According to its first quarter results for 2023, Ford Model e recorded a loss before interest and taxes of $700 million, which is $100 million more than in the fourth quarter of 2022.
The EBIT margin, which measures the profitability of the business, was -102.1%, meaning that Ford Model e spent more than twice as much as it earned. The revenue from EV sales was only $700 million in the first quarter, less than half of the $1.6 billion in revenue generated by Ford Model e in the last quarter of 2022.
The most shocking fact is that Ford only delivered 12,000 electric vehicles in the first quarter, which means that the carmaker lost $58,333 for each clean car sold during this period. This is a huge contrast with Tesla, which delivered 184,800 vehicles in the same quarter and made a profit of $438 million.
Ford’s EV Challenges: Competition and Demand
Why is Ford losing so much money on EVs? There are several factors that explain this situation. One of them is the fierce competition in the EV market, which is dominated by Tesla, but also includes other players such as Volkswagen, Hyundai, Toyota, GM, and newcomers like Rivian and Lucid.
Ford has to compete with these rivals on price, performance, design, technology, and customer loyalty. For instance, Tesla has a loyal fan base that is willing to pay a premium for its products and services. Tesla also has an advantage in terms of battery technology, software updates, autonomous driving features, and charging network.
Another factor is the low demand for EVs in some markets, especially in the US, where gasoline cars are still preferred by many consumers. According to Statista, EVs only accounted for 2.3% of the total vehicle sales in the US in 2022. The main barriers for EV adoption are the high cost, the limited range, the lack of charging infrastructure, and the consumer perception.
Ford has tried to overcome these barriers by offering incentives, such as tax credits, rebates, discounts, and free charging for its EV customers. However, these incentives also reduce Ford’s profit margin and increase its losses.
Ford’s EV Outlook: Hope or Despair?
Despite its disappointing results so far, Ford has not given up on its EV ambitions. The company expects to sell 600,000 EVs globally by 2023, which would represent a significant increase from its current sales level. The company also hopes that its new models, such as the F-150 Lightning and the E-Transit van, will attract more customers and generate more revenue.
Ford also believes that its investment in EVs will pay off in the long term, as the market grows and matures. The company projects that EVs will account for 40% of its global sales by 2030, which would make it one of the leading players in the industry.
However, Ford faces many challenges and uncertainties in achieving its EV goals. The company has to deal with supply chain issues, such as the global shortage of semiconductors, which has affected its production capacity and delivery schedule. The company also has to cope with regulatory changes, such as the new emission standards and tax policies, which could affect its profitability and competitiveness.
Moreover, Ford has to deal with the changing consumer preferences and expectations, which could make its EV products obsolete or irrelevant. For instance, Ford has to adapt to the rise of new mobility trends, such as ride-hailing, car-sharing, and subscription services, which could reduce the demand for car ownership. Ford also has to keep up with the innovation and disruption in the EV market, such as the emergence of new technologies, such as solid-state batteries, hydrogen fuel cells, and flying cars, which could change the game for the industry.
Ford is one of the most established and respected carmakers in the world, but it is struggling to make a successful transition to electric vehicles. The company has created a separate division for EVs, invested billions of dollars in EV development and production, and launched several new EV models. However, the company is losing money on every EV it sells, due to the low demand, high competition, and high costs.
Ford has not given up on its EV vision, and expects to increase its sales and market share in the future. However, the company faces many challenges and uncertainties in achieving its EV goals. The company has to deal with supply chain issues, regulatory changes, consumer preferences, and technological innovation.
Ford’s EV strategy is a gamble that could either pay off or backfire. The company has to find a way to balance its short-term losses and long-term gains, and to differentiate itself from its rivals. Ford’s EV future is uncertain, but it is not hopeless.