Ford Motor Co. Profits Take Hit Due to EV Costs
Ford is also shutting electric truck plant in Dearborn, Michigan, as sales slow.
The forced march to green energy utopia is running smack into market realities.
Ford Motor Company is now reporting lower profits and reducing its full-year earnings outlook. The fiscal hit is a consequence of hefty electric vehicle (EV) expenses weighing on results.
The major US automaker reported third-quarter profits of $892 million, down 26 percent from the year-ago level, on revenues of $46.2 billion, up 5.5 percent.
The results were the latest in which Ford has seen profits from its conventional internal combustion engine and fleet businesses offset losses in electric vehicles.
The results included a $1 billion hit after Ford in August pushed back the timeframe of one planned EV model and shifted away from a proposed EV project entirely.
Ford executives have said they are still bullish on EVs in the long-term, but that consumers “aren’t willing to pay a premium,” said Chief Financial Officer John Lawler.
It turns out the automaker’s continued EV losses nearly canceled out $1.2 billion in Q2 profit from its Blue division, which represents those “evil” internal combustion engine (ICE) vehicles.
Farley said during the call that when it comes to EVs and ICEs, the “math is completely different.”
“In ICE, the business we’ve been in for 120 years, the bigger the vehicle, the higher the margin,” Farley said. “But it’s exactly the opposite for EVs; the larger the vehicle, the bigger the battery, the more pressure on margin because customers will not pay a premium for those larger batteries.”
…Ford has been pulling back on its EV transition plans as it works to drive down costs. Last week, Ford announced it will invest $2.3 billion to build F-Series Super Duty pickups at its Oakville Assembly Complex in Ontario, Canada. The automaker previously announced plans to convert the facility into an EV manufacturing complex.
Apparently, the EV market is “volatile,” which makes sense as each EV now represents a $32,000/car loss vs. the $3200/car profit for ICE vehicles.
“EV price premiums over internal combustion vehicles fell more than $3,000 in the second quarter and nearly $5,000 in first half,” said Farley. “We expect the EV market to remain volatile until the winners and losers shake out.” But he confidently predicted that Ford “will be one of the winners.”
Still Ford, like the other traditional automakers moving to shift from ICE vehicles to EVs, is losing money at this stage. Ford’s numbers work out to a loss of about $32,000 per EV that it sold in the second quarter, compared to a profit of $3,200 per vehicle sold by the Ford Blue division.
Consumers have many concerns related to EVs. One of the most understated is that EVs are generally more expensive than their gas-powered counterparts. The average transaction price for EVs in June 2024 was $56,371, compared to $48,644 for ICE vehicles.
The difference of nearly $ 8,000 can be very impactful to family budgets.
One of Ford’s big sellers is its trucks, which are an essential part of life in rural America. EVs may not be practical for many people in those areas who have long driving distances or live in cold climates where battery performance can be significantly reduced.
Now the company has announced the closure of its Dearborn, Michigan plant for the final six weeks of 2024 due to sluggish demand for the F-150 Lightning electric truck.
The market for EV pickups has proven softer than producers had hoped, with anecdotal reports that lack of charging station access continues to weigh on consumer decision making. Earlier in 2024, Ford reduced production numbers for the Lightning EV by half. Plans to introduce an EV SUV for the US market were also scrapped.
The new closure will furlough 800 workers as a result and follows a round of layoffs during earlier EV production. To soften the blow, Ford notified employees that manager bonuses would be slashed by up to 65%, with future compensation tied more closely to performance metrics.
…For Ford, the plant closure is the latest in a series of disappointing developments in their EV efforts.
Hopefully, the manipulation of market conditions will soon end for one of America’s most important industries.
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Most people can’t even afford the ridiculous $40K+ price of an average ICE, so it’s hardly surprising that EVs are sitting collecting dust in dealers’ lots. Couple that with the inherent limitations of EVs, there’s little wonder why people are staying away in crowds from EVs.
One must anticipate charge offs in the manufacture of EVs.
It’s the lack of an onboard diesel battery charger.
$3,000 profit on a $50,000 vehicle? Those union legacy costs are eating them alive
The problem with EVs, aside from China trying to flood the global market with them, is that sales are dominated by the upper end of the mid range – things like Teslas, with most of their ‘rivals’ offering far less in range – e.g. 60% or less of a Model 3, or else premium and demanding a far far higher price,
For the ‘budget’ options, any trip that takes more than about 3 hours – assuming you’re not just puttering around the inner city, you need to recharge, which takes a long time. Supposedly you can get a full recharge in 10 minutes, but don’t hold your breath!!! Expect to come back in 30+, and that’s if it’s fast charging. If it’s a regular power socket, come back tomorrow!
The cities are happy with short range – that suits them, and they like low prices so saving money by not offering batteries with range works. But anyone who does longer travel simply can’t rely on such vehicles so they need to rely on other models or brands. But if they’re only sold to ‘country drivers’ then the smaller market means higher costs which makes them less affordable. At the same time the inner city EV drivers want recharging stations in close proximity because range anxiety is real. Who pays for those outside the cities? Country drivers can simply recharge at home, but that’s not an option for some urban drivers. Different issues different problems, but it’s the urban Left driving the EV agenda, and it’s being designed around their interests.
In other news, Henry Ford is diversifying into buggy whips as well. Sadly, nobody is buying many of those either. 😉
‘Farley said during the call that when it comes to EVs and ICEs, the “math is completely different.” ‘
Yeah so is the physics, and therein lies the fundamental problem with EVs. Physics (which means reality) always wins. Batteries just don’t have the energy density to make EV practical on a large scale. Gasoline has about a factor of 50 advantage over lithium-ion batteries. That’s energy storage by mass, not volume. The battery pack in EVs generally consists of an array of small batteries with its own overhead in terms of mass and volume. Thus EVs get very heavy and operate at the margin. The designers need to get the air drag down and that’s not easy. Change something and you suffer in range. Try hauling something with an EV pickup where you don’t get that optimized drag coefficient and watch the range plummet. Now drag forces increase with the square of speed, so the range specs are for speeds of around 55 mph. Try driving at 80 mph as they do in Texas or the highways in Germany and the range will fall way below that phony spec. Cold weather also drastically reduces range. The extra weight also creates problems. Extra wear on highway surfaces, and tires. Crash fences are not designed for heavy EVs. The problems go on and on. I can only scratch the surface.
Ford and other automobile companies have staff engineers who should understand all these limitations. I’ll speculate that staff engineers are afraid to speak up. Management is committed to EVs and don’t want contrary voices. Don’t want a dose of reality.
Here are some of the disciplines a company needs to design and manufacture and understand EVs. Thermodynamics, fluid mechanics, Electromagnetics, mechanical engineering, electrical engineering. It would help if the companies also understood queueing theory so they could see the tie ups at the charging stations. Few people cover all these disciplines and the best technical talent gets hired by the finance industry who pay a decent wage. I can tell you from direct experience that businessmen don’t have a high regard for technical talent, even contempt. They want good salesmen much more than good engineers.
Great summary. You touched on tire wear, which I’ve read is a double whammy. Not only does the vehicle weight cause more rapid tire wear, but the tires cost more – a lot more – because they need to support a heavier vehicle. Current EV designs are not financially viable for most folks. Or manufacturers at ($32,000 a pop).
I bring this up all the time in discussions regarding EVs – no “technological advancement” will be able to overcome the laws of physics & chemistry.
EVs are a solution in search of a problem. In addition their manufacturing is far dirtier than ICE vehicles.
No one is more blind than one who has chosen to not see.
flat tax
and then the people who make the decisions would not/could not be bailed out by the taxpayers
The Green Weenies strike again.