There’s nothing cheap about developing, manufacturing, delivering and investing in the future of electric vehicles (EVs). Ford Motor Co. is finding this out the hard way — just the same as many other automakers — with the company’s EV unit projected to lose about $3 billion in 2023.
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Is It A Big Deal?
A lot can be said for Ford’s honesty with the public, its investors and potential EV buyers. Rather than hide from or sugarcoat the truth, the automobile giant has been straightforward about its investment in electric vehicles and the impact on its bottom line.
Losing $3 billion — even for a company Ford’s size — is always a big deal. But Ford and its investors can take solace in the fact that the company still expects to generate a profit of between $9 billion and $11 billion this year.
It’s much easier to lose $3 billion in the EV niche when the company as a whole is making up for it with more than three times the profits. The company also has its sights set on an 8% profit margin for the division by the end of 2026.
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Why Is Ford Struggling In The EV Space?
Earlier this year, Ford CEO Jim Farley said during an earnings call that the company underestimated the expenses associated with boosting the production of electric vehicles.
“We didn’t know that our wiring harness for Mach-E was 1.6 kilometers longer than it needed to be. We didn’t know it’s 70 pounds heavier and that that’s [an extra] $300 a battery,” he said. “We didn’t know that we underinvested in braking technology to save on the battery size.”
These sound like oversights, but they’re actually growing pains. The electric vehicle market is still in its infancy. Automakers are constantly tweaking processes. Consumers are comparing their options and deciding whether it makes sense to buy now or wait until more of the kinks are worked out.
Other Problems The EV Market Must Solve
In addition to the above, other serious problems are standing in the way of the mass adoption of electric vehicles:
Inadequate charging infrastructure: It’s improving throughout the country but is far from where it needs to be to handle an ever-growing number of electric vehicles.
EV fueling costs: All-encompassing, the cost of fueling an electric vehicle is often higher than a gasoline-powered vehicle. This is a deterrent to consumers who are on the fence.
EV prices remain high: Until prices are on par with their gasoline-powered counterparts, electric vehicles will be considered a luxury purchase by most.
As leading automakers like Ford, General Motors Co. and Toyota Motor Corp. continue to spend big money — and take big losses — on electric vehicles, several startups are making noise at the bottom of the market.
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High-Risk, High Reward
It’s clear that there’s some serious upside associated with the risks involved. From general goodwill associated with their brands to the billions to be made in the current and future EV models. Lucid Group Inc. and Rivian Automotive Inc. are still sitting at premiums compared the ICE market, with many still bullish on the companies. Hence why these legacy automakers are willing to take these risks and invest in these technologies.
One of the biggest indicators, however, comes from the people investing in and, more importantly, buying these cars. Tesla Inc. began its climb to its astronomical heights when retail investors flocked to short-squeeze the stock, ultimately giving Tesla the billions it needed to thrive. Retail investors have been pouring millions into these clean-tech startups and other stocks and companies. So brands able to capture that value will reap the benefits.
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This article Electric Vehicles Are Draining Billions From Profitable ICE Legacy Automakers With Ford Projecting $3 Billion in Losses originally appeared on Benzinga.com
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Source: https://finance.yahoo.com/news/electric-vehicles-draining-billions-profitable-151050558.html