Ford’s recent earnings report has revealed a significant loss of $65,000 per electric vehicle sold, marking a continued losing streak for the company’s EV division. The CEO of Ford acknowledged that the electric vehicle segment was not only a burden on Ford but also on the entire industry. In contrast, Ford’s gas cars reported a profit in the first quarter of 2024.
Ford breaks down its earnings into three segments: Ford Model e, which covers electric vehicles; Ford Blue, which relates to gas and hybrid vehicles; and Ford Pro, which deals with the commercial segment. The Model e segment registered losses of $1.32 billion in the first quarter, while the other two segments reported profits of $905 million for Blue and $3 billion for Pro. This means that Ford’s electric vehicle department was the sole segment to report losses in the first quarter.
In terms of sales, Ford sold 20,223 electric vehicles in the first quarter of 2024, including 9,589 Mustang Mach-E SUVs, 7,743 F-150 Lightning trucks, and 2,891 Ford E-Transit electric vans. However, the $1.32 billion loss translates to over $65,000 lost per vehicle. In 2023, the Model e segment had already experienced a net loss of $4.7 billion.
Ford attributed the decline in revenue from the Model e segment to reduced wholesales and significant industrywide pricing pressure affecting electric vehicles on the market. The company expects improvement in EV costs going forward but anticipates that it will be offset by top-line pressure.
During Ford’s earnings call, it was revealed that Model e is projected to suffer losses of around $5 billion this year due to continued pricing pressure and investments in new vehicles. The CEO of Ford, Jim Farley, acknowledged that the company needs to make significant progress in the Model e department as it is not only hindering Ford but also the entire industry. He emphasized the importance of building a sustainably profitable EV business and ensuring that future EVs are profitable.
In February, Ford scaled down its EV investments due to the substantial losses faced by the Model e segment. The company delayed its second joint venture battery plant, reduced the size of its lithium iron phosphate plant in Michigan, and backed out from a JV battery plant in Turkey. Ford has made it clear that it will not launch Gen 2 EV vehicles unless they can achieve profitability and a return on investment.
Ford’s mounting losses in the electric vehicle segment coincided with a decline in American interest in EVs. A Gallup poll revealed that fewer Americans were seriously considering buying an EV in 2024 compared to the previous year. The percentage of Americans seriously considering buying an EV dropped from 12% in 2023 to 9% this year, while those who would not buy an EV increased from 41% to 48%. This decline in interest aligns with a January survey by KPMG, which found that confidence in EVs among automakers had decreased, and concerns about profitability had risen.
Despite declining interest among Americans, the Biden administration continues to promote policies that encourage a transition to electric vehicles. The recent EPA standards for cars aim to accelerate the adoption of cleaner vehicle technologies. However, a coalition of 5,000 U.S. car dealerships criticized these standards, stating that the regulations require an unrealistic increase in EV sales. They argue that customers continue to show concerns about affordability, charging infrastructure, performance in cold weather, and resale value.
In conclusion, Ford’s recent earnings report highlights the significant challenges faced by the company’s electric vehicle division. The losses incurred per electric vehicle sold are substantial, and Ford’s CEO recognizes the need for substantial progress in this segment. Meanwhile, American interest in EVs has declined, and automakers are becoming more cautious about the profitability of EV investments. Despite government support, there are still concerns among consumers and dealerships about the practicality and affordability of electric vehicles. Ford’s struggles in the EV market underscore the complexities and uncertainties surrounding the transition to electric mobility.
