Ford misplaced one other $1.2 billion on electrical automobiles within the third quarter – are you pleased with that?

From Robert Bryce's Substack

FoMoCo lost $58,391 for every electric vehicle sold in the quarter.

The ugly electric car news from Ford Motor Company keeps coming. This afternoon, the company reported that it lost $1.224 billion in the electric vehicle business in the third quarter. In early October, the company reported that electric vehicle sales “increased 14.8 percent, up from its best-ever sales of 20,962 vehicles.” So a simple division shows that the venerable automaker lost $58,391 for every electric vehicle sold in the quarter.

The company's losses from its electric vehicle business, known as Model e, totaled $3.7 billion in the first nine months of 2024. To illustrate, that $3.7 billion loss represents the gross profit (Ford calls it EBIT, short for “earnings before interest and taxes”) that it earned from Ford Blue, the division that makes internal combustion engine vehicles.

EBIT for Ford's ICEV and EV lines for the first three quarters of 2024. Source: Ford Motor Co.

Unfortunately, these results are not surprising. Ford has wasted money on electric vehicles over the past two years. The company lost $4.7 billion on electric vehicles in 2023 and $2.2 billion on electric vehicles in 2022. The numbers for the third quarter simply show once again that Ford's leadership made a huge mistake. CEO Jim Farley and his people didn't understand what drivers wanted to buy. That's a bad thing when you run one of the largest automakers in the world.

FoMoCo's third-quarter losses come just two months after the company said it was abandoning a planned three-row, all-electric SUV. In August, the company said: “Given price and margin compression, we have decided to adjust our product and technology roadmap as well as our industrial footprint to achieve our goal of being positive for all new models within the first 12 months of launch EBIT to be achieved.” ”

In other words, Ford warned two months ago that it would have to cut prices for its electric vehicles and that the third quarter would be a crapshoot. And that was it. Also in August, the company announced that it would shift some of its battery production from overseas factories to U.S. locations in order to qualify for additional federal subsidies under the Inflation Reduction Act. As I reported here last year, Ford and other automakers are looking to raise tens of billions of dollars for battery manufacturing in the U.S. through the 45x IRA tax credit. Ford, for example, is building a battery plant in Marshall, Michigan, which is expected to create around 4,200 jobs. According to Good Jobs First, each job at the new Ford plant will cost taxpayers $3.4 million.

From Morningstar: “Do electric vehicles short-circuit? Automakers are revising electrification strategies after falling demand.”

While Ford may claim that its sales have increased, the fundamental problems in the electric vehicle market have not changed. As seen above, ratings agency Morningstar, which predicted huge growth in electric vehicles 13 months ago, has now taken a negative view of the sector. In an Oct. 21 report titled “Are Electric Vehicles Short-Circuited?” “Automakers Revamp Electrification Strategies After Falling Demand” (subscribe required). Morningstar said major automakers, including VW, Ford, GM and Mercedes, had postponed their electric vehicle plans or cut planned production due to weak sales. Morningstar noted that while some automakers, including Ford, have cut prices, this has hurt their profitability. It also said EV sales to early adopters “seem to be exhausted and EVs are struggling to maintain ongoing sales momentum among mainstream consumers.”

Morningstar then listed the problems that have plagued electric vehicles for decades:

Electric vehicle range continues to be heavily impacted by extreme weather conditions, with cold weather (i.e. below 40 degrees Fahrenheit) potentially reducing range by approximately 25%. Concerns about electric vehicle charging infrastructure are compounded by the poor reliability of public electric vehicle charging stations. Furthermore, despite significant developments in recent years, charging times are still significantly longer than the typical time needed to refuel a traditional internal combustion engine vehicle. Additionally, while electric vehicles have fewer parts than combustion engine models and typically require less maintenance than combustion engine vehicles, one-off repairs (particularly to the electric vehicle battery) can prove prohibitively expensive. Accordingly, in most jurisdictions, insurance premiums for electric vehicles are typically higher than for comparable internal combustion engine vehicles, primarily due to potentially significantly higher repair costs. (Emphasis added.)

This paragraph pretty much sums up the electric vehicle market, especially in terms of cold weather, charging infrastructure and charging times. (For more on repair costs, see this story at Hertz.) All of these problems have been evident since the days of Edison. Why didn't Ford and the other automakers see this debacle coming? Was it herd mentality? Were they responding to government pressure? If so, why didn’t they push back? What did they know about electric vehicle demand from their own market research?

Here's my prediction: In a few years, after automakers have lost billions more on their misguided bets on electric vehicles, business schools and analysts will be asking the exact same questions.

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