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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