It’s no secret that the electric vehicle (EV) market is causing significant financial turmoil for traditional automakers like Ford. In the third quarter, Ford reported an operating loss of $1.3 billion in its EV division. This resulted in a loss of $62,016 for each of the 20,962 EVs it sold during that period. While this loss was smaller than the previous quarter, it still highlights the struggles automakers are facing as they attempt to transition to EVs.
According to Ford, these losses are due to continued investments in next-generation EVs and challenging market dynamics. In addition, EV price pressure is causing significant financial strain. Ford has already lost about $3.1 billion on its EV business this year, and it had previously estimated a loss of $4.5 billion for the entire year.
Ford admitted that many North American customers interested in EVs are unwilling to pay premiums for them compared to gas or hybrid vehicles. This is a significant challenge for automakers as they try to make EVs more accessible to the general public.
The truth is that the EV market has long been a niche-market product and is primarily defined by class and ideology. A Gallup poll from March found that a substantial majority of Republicans (71%) wouldn’t consider owning an electric vehicle. Furthermore, a study from the University of California, Berkeley, revealed that the adoption of EVs is primarily happening in affluent, left-leaning counties like Cambridge, San Francisco, and Seattle.
In essence, automakers have been investing billions of dollars to cater to a small segment of the car market, primarily concentrated in liberal counties. This strategy is proving to be unsustainable and damaging to the financial health of these companies.
Ford is not the only automaker facing challenges in the EV market. Other major automakers are also reporting significant losses on EVs or scaling back their EV expansion plans. The fact is that the universe of likely EV buyers is much smaller than automakers anticipated, resulting in wasted capital.
Recent statements by executives from companies like Mercedes-Benz and General Motors show that the EV sector is becoming increasingly challenging. Some automakers are even selling EVs at prices below the production costs of internal combustion engine cars, which is not a sustainable business model.
Even Elon Musk, the CEO of Tesla, expressed concern about slowing demand for EVs, indicating a broader issue in the market. General Motors is delaying production of its electric pickup trucks, and Ford is cutting shifts at its EV production plant, as well as halting work on an EV battery plant.
In contrast, Toyota has focused more on hybrids and expressed skepticism about the mass adoption of EVs. The company’s chairman, Akio Toyoda, believes that automakers are finally coming to terms with the reality of the EV market.
In conclusion, the financial challenges faced by Ford and other automakers in the EV market highlight the struggles in transitioning from traditional vehicles to EVs. The limited demand for EVs, coupled with substantial financial losses, is forcing these companies to reassess their strategies and priorities.
