(Source: MIRS.news, Published 05/17/2024) At least one of the Big Three automakers is spinning its tires when trying to navigate electric vehicle profitability. It was reported during a Consensus Revenue Estimating Conference (CREC) presentation Friday that Ford’s “Model e” division loses approximately $28,000 on every unit sold.
According to Ford’s quarter four and 2023 year-end financial numbers, the company could achieve up to 50 percent more profits without selling EVs.
Ford is the only “Detroit three” automaker that breaks out its EV profits and losses, said Kristin Dziczek, policy advisor for the Federal Reserve Bank of Chicago’s Research, Policy and Public Engagement Division, who presented at CREC on the changing electric vehicle landscape and its implications for Michigan. Other Michigan automakers could be seeing similar losses.
Dziczek said both purely electric vehicle producers and legacy internal-combustion engine (ICE) vehicle manufacturers, which are setting ambitious goals to transition to EV manufacturing, will continue to face unique challenges to stay profitable as EV production becomes more commonplace.
For purely electric brands, she said the biggest hurdles are going to be getting production up to scale and operating without the added advantage of shifting to market forces, which may turn favorable towards plug-in hybrids.
For legacy auto manufacturers, like Ford, which is anticipating 40 to 50 percent of its global vehicle volume to be fully electric by 2030, “you have to balance losing… production and market share of your very profitable vehicles while you’re ramping up something that you’re not yet making money off, and you better make money on it fast.”
Dziczek said the falling volume of more profitable ICE vehicles puts pressure on automakers to make profitable EVs, and changing state and federal regulations means they can’t afford not to make them.
According to comments on 2023 Ford financial results by CFO John Lawler, which Dziczek included in the presentation, selling one electric F-150 Lightning truck allows Ford to sell 12 F-150s with ICE engines, while still maintaining regulatory compliance.
It takes two ICE trucks to earn back the profits Ford loses on each F-150 Lightning, Dziczek said.
However, by 2032, Ford will only be able to sell one and a half F-150 ICE trucks for every one F-150 Lightning it sells and maintain regulatory compliance.
The challenge then becomes making EVs profitable to replace dollars from their ICE counterparts.
During a post-CREC press conference, state Treasurer Rachel Eubanks said it’s important to recognize the fact that with regulatory changes coming up, "they have to evolve, and that their profitability will have to keep track of that and get to a price where they’re more profitable.
“There’s some time, currently," she said. "Those sales of the traditional engines do subsidize some of those profitability losses in those areas. So I don’t think that’s a troublesome point, yet.”
She said while it’s potentially a risk on the horizon, “it’s not something that we’re seeing today.”
Eubanks added that she feels the state is “nicely balanced” when it comes to economic development and investments made to attract and retain the next generation of electric vehicle components.
“I think we're really uniquely positioned to weather . . . either direction, depending on whichever way that consumers decide to go,” she said, referring to hybrid or battery-powered EV’s.
