How bad is the EV business? Yesterday afternoon, Ford Motor Company reported that the operating loss it incurred on its EV business in 2023 exceeded its total profit for the year.
That shocking fact comes directly from the company’s earnings report, which carried the headline, “Ford+ Delivers Solid 2023…”
The Dearborn-based auto giant had an operating loss (also known as EBIT, or earnings before interest and taxes) of $4.7 billion on its EV business last year. [emphasis, links added]
Meanwhile, the company reported net income (profit) of just $4.3 billion, on revenue of $176 billion. The company also reported operating income, or what it called “adjusted EBIT,” of $10.4 billion.
Calculating the company’s per-EV operating loss requires only a bit of simple division. The company sold 72,608 EVs last year and had an EBIT loss of $4.7 billion in its “Model E” segment.
Thus, the auto giant lost a knee-buckling $64,731 for each EV it sold in 2023.
To put that $64,731 per vehicle loss in perspective, a top-of-the-line Mustang Mach-E listed on the website of a large Ford dealership here in Austin (see below) is selling for $66,615.
The company said the $4.7 billion loss reflected “an extremely competitive pricing environment, along with strategic investments in the development of clean-sheet, next-generation EVs.”
The $4.7 billion loss is far higher than the $3 billion loss Ford projected back in March. Further, it’s more than double the $2.2 billion loss it recorded in the EV segment in 2022.
Thus, in the last two years alone, the company has lost nearly $7 billion on its foray into fully electric automobiles. Recall that, as I reported here last July, the company has plans to spend $50 billion on EVs.
Given the company’s 2023 results, it’s clear that Ford’s headlong plunge into the EV market has been an unmitigated disaster and that the company would have been far more profitable had it ignored the EV fad.
Of course, the company tried to put a positive spin on its EV results, noting that EV sales rose by 18% last year. But those sales must be put into context.
In 2023, Ford sold 750,789 F-Series trucks. Thus, the auto giant sold more than 10 times as many conventionally powered trucks as EVs (72,608).
Warnings about the company’s failing EV business have been coming for months. In December, the automaker announced it was slashing production of its F-150 Lightning in half, from 3,200 trucks per week to 1,600 per week, as part of an effort “to match Lightning production to customer demand.”
On January 19, the company said it was cutting production of Lightning even further because, as Reuters reported, “demand for EVs has been lower than expected.”
What should be particularly worrisome for investors — and for the company’s CEO Jim Farley — is that Ford’s EV losses aren’t falling, they are rising.
Indeed, those losses doubled between the first quarter and fourth quarter of 2023. Ford’s first-quarter EV operating loss was $722 million. In the second quarter, it was $1.1 billion. In the third quarter, it was $1.3 billion, and in the fourth quarter, Ford’s EV operating loss hit $1.57 billion.
Ford’s losses are only part of the ongoing train wreck in the EV market.
Last October, General Motors said it would delay the opening of a $4 billion electric truck factory in Michigan for a year.
That same month, Reuters reported that Honda and General Motors “were ending a $5 billion plan to develop lower-cost EVs together just a year after announcing the effort.”
The article continued, noting that GM “would focus near-term EV efforts on meeting demand rather than hitting specific volume targets.”
In November, nearly 3,900 automobile dealers across the country sent a letter to President Biden telling him that EV demand is “not keeping up with the large influx of BEVs arriving at our dealerships prompted by the current regulations. BEVs are stacking up on our lots.”
They continued, saying EVs are “not selling nearly as fast as they are arriving at our dealerships.”
As I explained in the written testimony I submitted to the Senate Energy and Natural Resources Committee last month, EVs have always been a niche-market product, not a mass-market one.
And that niche market is dominated by wealthy, white, male liberal voters who live in a handful of heavily Democratic cities and counties.
Further, that niche market is primarily defined by class and ideology. Some 57% of EV owners earn more than $100,000 annually, 75% are male, and 87% are white. Last March, Gallup reported, “a substantial majority of Republicans, 71%, say they would not consider owning an electric vehicle.”
Last October, researchers at the University of California, Berkeley, released a remarkable study that found “counties with affluent left-leaning cities” like Cambridge, San Francisco, and Seattle “play a disproportionately large role in driving the entire national increase in EV adoption.” The researchers found that over the past decade, about half of all the EVs sold in the U.S. were sold in the most heavily Democratic counties in the country. The summary of the study deserves quoting at length:
“The prospect for EVs as a climate change solution hinges on their widespread adoption across the political spectrum. In this paper, we use detailed county-level data on new vehicle registrations from 2012-2022 to measure the degree to which EV adoption is concentrated in the most left-leaning U.S. counties.
“The results point to a strong and enduring correlation between political ideology and U.S. EV adoption. During our time period about half of all EVs went to the 10% most Democratic counties, and about one-third went to the top 5%. There is relatively little evidence that this correlation has decreased over time, and even some specifications that point to increasing correlation. The results suggest that it may be harder than previously believed to reach high levels of U.S. EV adoption.” (Emphasis added.)
Perhaps the most remarkable thing about the staggering losses at Ford and the other automakers is that the carmakers didn’t understand the limited appeal of EVs.
Their lack of knowledge of the history of EVs, the concentrated nature of the market, and the limited number of motorists interested in buying EVs should go down as one of the biggest blunders in modern automobile history.
Again, as I noted in my written testimony:
Ford and the other big automakers have been spending billions of dollars to cater to the whims of a tiny segment of the overall car market — a segment heavily concentrated in a handful of liberal counties. That’s a lousy business strategy. But it is an even worse strategy for federal policymakers who must be responsive to the transportation needs of every American, not just those who live in liberal cities and large, wealthy states.
Toyoda said automakers are “finally seeing reality” about all-electric cars. Unfortunately for Ford and its shareholders, finally seeing reality comes with multi-billion-dollar losses.
A final note: Ford’s EV sales in January fell by 11% compared to the same period last year. There’s more carnage ahead for FoMoCo.
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