Molly Ayala
Ford Motor Company, commonly known as Ford, is one of the traditional automakers that has been losing money in its electric vehicle (EV) business. Despite this, Ford CEO Jim Farley remains committed to expanding the company's EV production. In 2023, Ford lost an estimated $36,000 on each of the 36,000 electric vehicles it delivered to dealers in one quarter. This has led to Ford withdrawing its full-year results forecast due to uncertainty and postponing $12 billion in spending on a new EV factory. While Ford's EV business is currently unprofitable, the company's overall profits have risen due to strong sales of its traditional internal combustion engine vehicles.
| Characteristics | Values |
|---|---|
| Loss per electric vehicle sold | $32,000 - $36,000 |
| Loss in the second quarter | $722 million |
| Expected loss for the full year | $4 billion |
| Loss in the third quarter | $1.3 billion |
| Loss in the first nine months of 2023 | $3.1 billion |
| Number of electric vehicles delivered to dealers in the quarter | 36,000 |
| Number of battery electric vehicle sales in the US in the first nine months of 2023 | 873,000 |
| Number of electric vehicles to be produced by the end of 2023 | 400,000 |
| Number of workers to receive a 25% wage hike | 57,000 |
| Additional labor cost per vehicle | $850 - $900 |
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What You'll Learn
- Ford lost $36,000 on each of 36,000 electric vehicles delivered to dealers in Q3 2023
- Ford CEO Jim Farley is committed to expanding EV production
- Ford's EV business lost $1.3 billion in adjusted earnings in Q3 2023
- Ford's EV losses are climbing, but overall profits are rising
- Ford's EV factory building plans are on hold due to high costs
Ford lost $36,000 on each of 36,000 electric vehicles delivered to dealers in Q3 2023
Ford Motor Company lost an estimated $36,000 on each of the 36,000 electric vehicles it delivered to dealers in the third quarter of 2023. This amounts to a total operating loss of $1.3 billion for the quarter, up from $1.1 billion in the previous quarter and more than double its loss from Q3 2022.
Ford's losses on electric vehicles have been attributed to various factors. One significant reason is the intense competition from Tesla, which triggered a price war in the EV market. Ford was forced to reduce the price of its Ford Lightning model by thousands of dollars to keep up with Tesla's aggressive pricing. Additionally, Ford's investment in next-generation EVs and challenging market dynamics have contributed to its losses. The company noted that many North American customers interested in buying EVs are unwilling to pay premiums for them over gas or hybrid vehicles, putting pressure on EV prices and profitability.
Furthermore, Ford's decision to split its operations into two businesses – Model e, focused on electric vehicles, and Ford Blue, focused on traditional gas and diesel-powered vehicles – may have impacted its profitability. While Ford Blue has been successful, with higher year-on-year revenue, the Model e unit has continued to lose money, with a year-to-date loss of $3.1 billion.
In response to these losses, Ford has withdrawn its full-year results forecast, citing uncertainty over the pending ratification of its deal with the United Auto Workers (UAW) union. The company has also warned of continued pressure on electric vehicles, sending its shares down more than 4% after hours. Ford has also decided to slow down the ramp-up of money-losing EVs, shifting its investment to its commercial vehicle unit, and plans to quadruple sales of gas-electric hybrids over the next five years.
Despite the losses, Ford remains committed to its EV expansion. CEO Jim Farley has expressed his determination to expand the production of electric cars while also making more energy-efficient gas-powered and hybrid models. Ford believes that gaining market share in the electric vehicle market is crucial for the company's future success, even if it means selling its electric vehicles at a loss in the short term.
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Ford CEO Jim Farley is committed to expanding EV production
Ford CEO Jim Farley is committed to expanding the company's electric vehicle (EV) production, despite the challenges posed by the ongoing losses in its EV business. In an interview with NPR, Farley acknowledged that Ford is losing billions in its EV unit, with an estimated loss of $36,000 on each of the 36,000 electric vehicles delivered to dealers in one quarter. However, he remains steadfast in his commitment to EV expansion, insisting that Ford is still on board with its EV targets.
Farley justifies his commitment to EVs by citing the loyalty of early EV adopters, stating that those who go electric are unlikely to revert to traditional vehicles. He believes that the first buyers of Ford's first-generation electric vehicles will also be the first to purchase their second-generation electrics. This strategy is crucial for Ford's long-term profitability in the EV market, as the company aims to build a strong customer base for its future electric models.
To address the financial challenges, Farley has delayed some targets and adjusted the timeline for scaling up EV production. He emphasizes that these delays are due to technical challenges rather than a change in strategy. Ford initially planned to produce EVs at a rate of 600,000 per year by the end of 2023, but this milestone has been pushed into 2024. Despite these setbacks, Farley remains resolute, stating that Ford is not backing off its EV commitment.
Farley also highlights the importance of gaining market share in the electric vehicle sector. Ford is willing to sell its electric vehicles at a loss for now to achieve this goal. The company's electric version of its top-selling model, the F-150 Lightning pickup truck, is a strategic move to establish Ford as a leader in the electric pickup market. Additionally, Ford is addressing the issue of high EV prices by releasing new models like the F-150 Lightning Flash, a mid-priced trim of its electric truck, to cater to a wider range of customers.
While Ford's EV business faces financial hurdles, Farley remains committed to expanding EV production. He believes in the potential of the next generation of Ford EVs to be profitable, describing them as "radically simplified" and utilizing more efficient manufacturing processes. Farley's determination to embrace the electric revolution positions Ford as a key player in the transition to electric vehicles, even in the face of strong competition from Tesla and other automakers.
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Ford's EV business lost $1.3 billion in adjusted earnings in Q3 2023
Ford Motor Company is facing financial challenges in its electric vehicle (EV) business, with a loss of $1.3 billion in adjusted earnings reported in the third quarter of 2023. This loss is attributed to various factors, including rising costs, softening demand, and pricing pressures.
Ford's CEO, Jim Farley, has acknowledged the losses in the EV business and has expressed his determination to expand EV production. The company's strategy includes selling its electric vehicles at a loss to gain market share and focusing on future generations of Ford EVs, which are expected to be profitable. However, this approach has resulted in a significant financial impact, with Ford losing an estimated $36,000 on each of the 36,000 electric vehicles delivered to dealers in the quarter.
To address the financial challenges, Ford has made the decision to pause approximately $12 billion in spending on a new EV factory in Kentucky. This postponement is a direct response to the softening EV demand and customers' reluctance to pay premium prices for electric vehicles. The company expects to lose a total of $4 billion for the year in its EV business.
Despite the losses, Ford's traditional business operations, known as Ford Blue, earned $1.72 billion during the third quarter of 2023, while its Ford Pro commercial business earned $1.65 billion. The company is also exploring ways to balance the production of gas, hybrid, and electric vehicles to meet consumer demands and improve overall business performance.
In addition to financial challenges, Ford is navigating practical obstacles in the EV market. The company's CEO, Jim Farley, highlighted the importance of addressing issues such as charging stations to ensure a seamless experience for electric vehicle owners.
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Ford's EV losses are climbing, but overall profits are rising
Despite Ford's electric vehicle (EV) business losses climbing, the company's overall profits are rising. In the second quarter of 2023, Ford's losses before interest and taxes (EBIT) from its EV business, Model e, increased to $1.1 billion, up from $722 million in the first quarter. The company expects these losses to continue rising in the short term, with a forecasted Model e EBIT loss of $4.5 billion for the full year, a significant increase from its earlier $3 billion loss estimate.
Ford's determination to expand its EV production has resulted in substantial losses. The company lost an estimated $36,000 on each of the 36,000 electric vehicles delivered to dealers in the third quarter, a higher loss per EV compared to the second quarter. This loss has been attributed to various factors, including the competitive EV market, with Tesla triggering a price war, and the challenges of charging infrastructure. Ford's investment in the now-shuttered Argo automated vehicle business also contributed to its losses, with a $2.7 billion non-cash writedown.
However, Ford's overall profits are rising due to the strong performance of its traditional internal combustion engine (ICE) vehicles and hybrid models. In the third quarter, Ford reported a profit of $1.2 billion, a significant improvement from the previous year's loss of $827 million. The Ford Pro commercial vehicle business and the Ford Blue combustion and hybrid vehicle business posted higher year-on-year revenue, EBIT, and EBIT margins. Ford's hybrids, such as the hybrid F-150 and the popular hybrid Maverick, have been selling well, contributing to the company's overall profitability.
While Ford's EV business faces challenges, CEO Jim Farley remains committed to its EV expansion. He believes that gaining market share through the sale of electric vehicles at a loss will position the company for future success. Farley is confident that the next generation of Ford EVs will be profitable, describing them as "radically simplified" and promising more efficient manufacturing and different battery chemistry. Ford expects to achieve an 8% profit on its EVs business by 2026.
To address the rising losses in its EV business, Ford has made strategic adjustments. The company has withdrawn its 2023 forecast due to "uncertainty" and is slowing down the ramp-up of money-losing EVs. Ford is also pausing $12 billion in spending on a new EV factory in Kentucky, citing softening EV demand and customer reluctance to pay premium prices. Instead, Ford plans to shift investments to its commercial vehicle unit and focus on increasing sales of gas-electric hybrids over the next five years.
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Ford's EV factory building plans are on hold due to high costs
Ford Motor Company has put its plans for a $12 billion EV factory on hold due to high costs. The company is facing challenges in its transition to electric vehicles, with losses in its EV business amounting to $1.3 billion in the past quarter and a total expected loss of $4 billion for the year. The decision to pause the construction of the Kentucky plant, a ""mega campus" for lithium-ion batteries, is a result of softening EV demand and customer reluctance to pay premium prices for electric vehicles.
Ford's CEO, Jim Farley, has expressed determination to expand EV production while also improving the energy efficiency of gas-powered and hybrid models. The company's strategy includes selling its electric vehicles at a loss to gain market share, with the expectation that future generations of Ford EVs will be profitable. However, this approach has led to significant losses, with Ford losing an estimated $36,000 on each of the 36,000 electric vehicles delivered to dealers in one quarter.
Despite the setbacks, Ford remains committed to its EV expansion and is working to build a full EV line-up. The company has split its operations into two businesses: Model e, focused on electric vehicles, and Ford Blue, focused on traditional gas and diesel-powered vehicles. Ford Blue's profits are intended to fund Model e's future. In addition to the paused Kentucky plant, Ford is also facing challenges with its Oakville Assembly Plant in Ontario, which is undergoing a transformation from a gas vehicle assembly plant to an EV manufacturing complex. The launch of Ford's upcoming electric vehicles at this plant has been delayed to 2027 to allow for the development of the consumer market for three-row EVs and to take advantage of emerging battery technology.
While Ford's plans for the Kentucky EV factory are currently on hold, the company is proceeding with other investments in EV battery plants and assembly plants in Tennessee and Michigan. These investments include the BlueOval SK joint venture battery plants in Tennessee and Kentucky, as well as a smaller Michigan battery factory. Ford's commitment to its EV strategy is evident, even as it navigates the challenges of high costs and softening demand.
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Frequently asked questions
No, Ford is currently losing money on its electric vehicles (EVs). In the second quarter of 2023, Ford lost about \$32,000 per EV sold, and in the third quarter, the company lost an estimated \$36,000 on each of the 36,000 EVs delivered to dealers.
Ford is facing challenges in the EV market due to several factors. Firstly, there is an unwillingness by customers to pay extra for electric vehicles, as they are perceived to be too expensive compared to traditional internal combustion engine vehicles. This has resulted in soft demand for EVs, causing Ford to pause its investment in new EV factories. Additionally, Ford is competing with Tesla, which has a significant lead in cost and branding, making it challenging for Ford to catch up and establish itself as a profitable EV manufacturer.
Ford CEO Jim Farley has stated that the company's next generation of EVs will be "radically simplified," utilizing different battery chemistry and more efficient manufacturing processes to improve profitability. Ford is also focusing on expanding its energy-efficient gas-powered and hybrid models, such as the hybrid F-150 and the popular hybrid Maverick, to generate profits that can fund future EV development.
