Not a Great Business Model - Ford is Bleeding Losses on EV's

[Lunentucker]

https://www.caranddriver.com/news/a60621256/ford-ev-revenue-losses-q1-2024/

• Ford's Model e EV division reported a net revenue of around $100,000,000 in the first quarter.
• Adding in expenses, though, the Blue Oval's EV arm lost $1.3 billion for the quarter.
• Ford largely blames margin-cutting price cuts for the massive drop in revenue compared to Q1 2023.

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[Scott L]

So making it up in volume didn’t work? Huh. If I say what I really think here I’ll be banned so I’ll keep my keyboard silent.

 

[Guns_N_Rosaries]

The Lightning was trash. If you actually used it like a truck, you got a small fraction of its claimed range.

Nobody wanted the Mustang Mach E.

Electric cars are too expensive. Maybe if these things had been introduced when the economy was booming they'd be a bigger hit. There's no way people are going to pay the electric car premium when simple things like groceries are become hard for the average person to afford.

Electric cars are inconvenient. You have to remember to plug it in when you get home. You have to get an electrician to come out and install a charging port at your house. You have to spend half an hour waiting for your car to charge when you're on a trip.

 

[Lunentucker]

I recently looked at the little EV Subaru that's essentially an electric Crosstrek.
Thought it might be perfect for my wife, since she never drives any more than about 70 miles round trip.
It simply doesn't make sense economically.
I can't make it make sense.

Henry Ford would fire everyone and shut the whole division down.

 

[steveorama]

https://www.caranddriver.com/news/a60621256/ford-ev-revenue-losses-q1-2024/

• Ford's Model e EV division reported a net revenue of around $100,000,000 in the first quarter.
• Adding in expenses, though, the Blue Oval's EV arm lost $1.3 billion for the quarter.
• Ford largely blames margin-cutting price cuts for the massive drop in revenue compared to Q1 2023.

This isn't unheard of by large corporations. Amazon operated at loss for years all the while gobbling up market share and driving out competition. Amazon reported a net loss of $4.6B in 2017 despite its revenue reaching $177.9B. This investment strategy paid off in the long run though, as Amazon's market capitalization exceeded $1 trillion in 2018, making it one of the most valuable companies in the world. Walmart did something very similar in the 90's into the early 2000's with rapid expansion. Opening all of those locations and purchasing volume quantities was certainly not cheap for them when they were expanding and pushing out the competition. Walmart's revenue grew from $93.6 billion in 1992 to over $219 billion in 2002, despite experiencing losses in some fiscal years during this period. When all the competitors have been driven out they are now one of the few games in town and can push their vendors to the price point they want and sell at the margin they desire.

At the end of the day all of the major car manufacturers WILL be transitioning into the EV market. Those that get there first and work out the R&D and acquire the market share will have the advantage over their competition. They are simply investing in what they believe to be the future. If investors really thought they were loosing value from this they wouldn't be able to sell fast enough. Last I checked Ford is almost 5% up from last year and 21% up over 5Y. Likewise Stellantis is up 49% YTD and 56% up over 5Y. And that's after their announcement this past year of investing $50B over the next decade in electrification. They will not recoup that investment over night. They're playing the long game here. According to market research, the global electric vehicle market size was valued at $162.34 billion in 2020 and is projected to reach $802.81 billion by 2028, growing at a compound annual growth rate of 22.6% from 2021 to 2028.

Some people might question whether EVs are the way to go or not, but that doesn't matter much. It's just how big companies operate. People fought against online shopping for years too as it would drive out mom and pop shops in their towns. It was inevitable though and a lot of those other brick and mortar locations have been shuttered and there is a lot less competition in the retail sector because of it. This is a rinse and repeat cycle that happens in many industries and just happens to be the car industry at the moment. Corporations are in it to maximize profits for themselves and their shareholders. They simply do not care about anything else. If EV's are impractical and inefficient, they will just invest in or sell us something else that tries to remedy that.

FWIW, the oil and gas companies also are hedging their bets and diversifying in other additional energy markets. They're going to stay rich regardless. Oil giants including BP, Shell, and ExxonMobil collectively invested over $7 billion in renewable energy projects in 2020. You will just see Chevron/Exxon/Shell branded energy plants and recharging stations instead of refineries and gas stations. Shell, for example, has been expanding its network of electric vehicle charging stations globally through its subsidiary, Shell Recharge. This is the future like it or not everybody. It's important to think grand and globally here and understand how corporations work vs how most people think which is at the micro level and is very regionally socioeconomically based that impacts them directly.

And before I get beat with a stick, I want to clarify that I identify as a fiscal conservative from Texas, and I have personal and family connections deeply rooted in the oil and gas industry. However, I'm offering this perspective based on my observations rather than succumbing to popular narratives. It's crucial to follow the actions of market players, billionaires, and politicians as they often reveal the true trends, even if their public statements may suggest otherwise.

(Damn, that really makes me sound a bit like a conspiracy nut, but sometimes things are just really obvious if you know where to look. While everyone's busy arguing, it's important not to overlook what's really happening.)

 

[Sting-Gray Neutral Pres.]

Electric cars are inconvenient. You have to remember to plug it in when you get home. You have to get an electrician to come out and install a charging port at your house. You have to spend half an hour waiting for your car to charge when you're on a trip.

This is the part of EV ownership most people don't really understand until they live it. It's actually the opposite of what you are presuming here; plugging it in when you get home becomes as second nature as remembering to close your car door, and it's actually the entire concept of "going out of the way to a gas station to fill up with stinky dirty fuel" that starts feeling incredibly inconvenient and expensive after a while.

But the other thing folks are suggesting in this post is definitely true: Automakers in general and Ford in particular put themselves in this mess by only producing large, top trim vehicles that require massive batteries for mediocre range at obscene price points. After the double whammy of interest rate hikes and inflation these halo cars ran out of consumer appeal real quick. With current battery technology the best use case for BEVs, for most people, is as a second vehicle that is a no-nonsense city/metro area runabout. 40-60 kwh, 2wd, and a price point under $30k before incentives and they absolutely fly off the lots. Once Chevy nailed this formula Bolts have been selling as fast as they can make them, enough so that they have been forced to un-cancel it. They just make excellent economic sense for consumers at that price point. Also from firsthand experience I can tell you that any of these are vastly better driving experiences that other small penalty boxes that are powered by 2 tired hamsters and a rubber band.

The difficulty for manufacturers is this requires them to make "small cars" again, and this has been particularly hard for Ford which a few short years ago declared the "car" dead and stopped making sedans and hatchbacks.

 

[Lunentucker]

 

[Rahkmalla]

Nobody wanted the Mustang Mach E.

Which is unfortunate, the MachE is fantastic. But then again I have a fetish for Station Wagons (which the MachE is no matter how many times they call it an SUV to please the masses)

 

[Rahkmalla]

particularly hard for Ford which a few short years ago declared the "car" dead and stopped making sedans and hatchbacks

Ford did this because of the chicken tax. They didn't want to build sedans that were price and feature competitive to the Japanese, so they abandoned the segment as soon as they could find a reason to get away with it.

The car 'died" because small shifts in the market gave them (and GM) enough confidence to declare it dead and think the average person would listen and agree. Meanwhile Camrys are Accords are still great.

 

[Rahkmalla]

I recently looked at the little EV Subaru that's essentially an electric Crosstrek.
Thought it might be perfect for my wife, since she never drives any more than about 70 miles round trip.
It simply doesn't make sense economically.

I actually considered a Nissan Leaf a handful of years back. At the time they were 28k with 7500 federal incentives, 5k state incentives, and no sales tax (another state incentive). Also they were selling slowly so there were rebates. I know the market has shifted, but for people looking for a little shitbox gas saver, the ecnomics definitely made sense for a lot of people at one point before the market went pear-shaped. I abandonned the idea because:
1. I have street parking and my township wouldn't approve an assigned spot in front of my house for me to charge (i went to a town council meeting and asked, and was essentially told that i could file an application, but since they don't have a specific form for such a thing, they probably wouldn't ever get to it)
2. I would have hated EVERYTHING about a nissan leaf except the savings, so dealing with not even being able to charge it consistently without asking my shitbag neighbors to be considerate just wasn't a hurdle I was willing to add to make that turd looking thing work.

 

[Sting-Gray Neutral Pres.]

Ford did this because of the chicken tax.

The chicken tax is a 25% import tariff on trucks and vans manufactured oversees, so all manufacturers, "foreign" or "domestic", build their US market trucks and vans in North American for this reason. It's not really applicable to Ford deciding they don't need to sell sedans and hatchbacks anymore.

 

[Rahkmalla]

The chicken tax is a 25% import tariff on trucks and vans manufactured oversees, so all manufacturers, "foreign" or "domestic", build their US market trucks and vans in North American for this reason. It's not really applicable to Ford deciding they don't need to sell sedans and hatchbacks anymore.

Most foreign mnfrs still build their sedans overseas, so i would say it really is applicable. Ford doesn't want to build "domestic" cars outside North America, so they just stopped building them (mostly).

 

[Rummie]

The intense hate that some show towards BEVs in these threads is bizarre. I can understand hating the politics of trying to force them on people (and I am completely against that as well), but not the cars themselves. People need to separate their hate of the politics from the tech of the cars.

If they work for your situation they are a great option. If they don't, then you just buy what does. Endless arguments about why others should view them as good or as bad are like telling people what food they should enjoy.

I leased my wife a Tesla Model X Plaid a little while back. For our use case it's freaking excellent. It has insane pull your face back acceleration. It's extremely easy to plug in at home in the garage, I don't need to do oil changes or stop at gas stations. And one of the best things was not dealing with a scumbag auto dealership to buy it. These things may not be important to you but they are to me.

For long trips we are usually in the Gladiator heading to parts unknown. Driving around town the Tesla technology is fun and easy. Little things like single peddle driving and effortless acceleration make a significant difference. Not to mention that I can get in at home and tell it to take me to work if I don't feel like driving. It gets me all the way there without a single intervention.

Yeah, it's expensive. And I don't get the $7500 tax incentive. It's still completely worth it to me. It doesn't have to be to you. Just settle down and drop the silly hate. Have hate towards the politics not the tech.

 

[Zachanadandy]

The Lightning was trash. If you actually used it like a truck, you got a small fraction of its claimed range.

Nobody wanted the Mustang Mach E.

Electric cars are too expensive. Maybe if these things had been introduced when the economy was booming they'd be a bigger hit. There's no way people are going to pay the electric car premium when simple things like groceries are become hard for the average person to afford.

Electric cars are inconvenient. You have to remember to plug it in when you get home. You have to get an electrician to come out and install a charging port at your house. You have to spend half an hour waiting for your car to charge when you're on a trip.

Refueling while I sleep couldn't be more convenient. I agree with some of your points, and wouldn't own an EV as an only vehicle, roadtrips, etc. If I didn't commute in a company vehicle, it would be an EV 100%. Cheaper than gas and can fill it up in the driveway? They aren't there yet for everyone, but as a commuter they are hard to beat. I don't see the EV premium, things like a leaf are literally on par with the cheapest ice vehicles these days. A model 3 is comparable to a similarly equipped Honda civic. Everything is expensive.

 

[Rummie]

I don't see the EV premium, things like a leaf are literally on part with the cheapest ice vehicles these days.

With the manufacturing advancements, overall simplification and reduction of moving parts the EV premium is going to be negative in the not too distant future. I expect that a large part of future attraction to EVs will be the purchase price compared to ICE vehicles.

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