Ford’s electric vehicle division is in crisis as losses mount, and experts warn that the company’s decision to go “all-in” on electric vehicles is a tremendous risk that requires ongoing support from government subsidies. With each electric vehicle sold costing the company roughly a $60,000 lss, the division’s yearly losses could total $3 billion. Despite this, Ford’s CFO describes targets for profitability by the end of 2024 as “totally realistic.” In the face of production issues with its Mustang Mach-E SUV and F-150 Lightning pickup truck, Ford is slashing prices to remain competitive with Tesla. Stay tuned for more details on this developing story.
Ford’s electric vehicle division is struggling to stay afloat, with losses mounting as production issues continue to plague the company. Despite aggressive cost-cutting measures, the division lost $722 million in the first quarter of 2023 while selling only 12,000 units. This amounts to roughly $60,167 in losses for each electric vehicle sold. Private analysts predict that the total cost of green manufacturing subsidies under President Joe Biden’s Inflation Reduction Act will exceed $1 trillion, with subsidies for electric vehicle battery packs alone topping $130 billion. While Ford expects to begin turning a profit by the end of 2024, experts warn that the division’s decision to go “all-in” on electric vehicles is a tremendous risk.
Ford’s electric vehicle division’s losses in the first quarter of 2023 are due to production issues with its Mustang Mach-E SUV and F-150 Lightning pickup truck, which hindered production and resulted in a 32% decrease from the same period in 2022. Despite this, Ford characterizes the division as “operating like a startup” and expects to produce 600,000 units per year by the end of 2023. The company recently cut the price of its Mach-E by $3,750 in an ongoing price war with Tesla, according to CNN.
While Ford expects to begin turning a profit by the end of 2024, experts warn that the division’s decision to go “all-in” on electric vehicles is a tremendous risk that requires ongoing support from government subsidies. The total cost of green manufacturing subsidies under President Joe Biden’s Inflation Reduction Act is predicted to exceed $1 trillion, with subsidies for electric vehicle battery packs alone topping $130 billion, according to private analysts.
Heritage Foundation economist E.J. Antoni points out that the auto industry is capital-intensive and has high fixed costs that need to be spread out over thousands of units. Therefore, it is not uncommon to have steep losses initially, followed by profits. However, Antoni characterizes the decision to go “all-in” on electric vehicles as a “tremendous risk” that requires ongoing support from government subsidies.
Despite these risks, CFO John Lawler describes Ford’s targets for profitability by the end of 2024 as “totally realistic” in the context of the company’s “aggressive” cost-cutting moves. Ford expects its electric vehicle division to begin turning a profit by the end of 2024 and to have an 8% profit margin by 2026, according to Reuters.
Ford’s electric vehicle division’s losses are part of a larger pattern of companies struggling to compete with Tesla in the electric vehicle market. While Tesla’s revenue increased by 74% in the first quarter of 2023, other automakers, including Ford and General Motors, have reported losses or lackluster sales in their electric vehicle divisions.
Ford’s electric vehicle division is struggling, with each sale costing the company approximately $60,000. As Tesla dominates the electric vehicle market, it’s becoming clear that investing heavily in electric vehicles is a significant risk. Ford aims to become profitable by late 2024, but experts warn that government subsidies are keeping the division afloat and are unsustainable. Without substantial support from governments, automakers may struggle to produce electric vehicles at scale. Stay tuned for more breaking news, and subscribe below with notifications enabled to stay informed.
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