Ford’s EV Losses Rise, but Offset by Combustion Engine Vehicle Sales

Ford Motor Co.'s electric F-150 Lightning on the production line at their Rouge Electric Vehicle Center in Dearborn, Mich., on Sept. 8, 2022. (Jeff Kowalsky/AFP via Getty Images)

Ford Motor Co.’s electric vehicle (EV) business is taking losses, although earnings from its traditional internal combustion engine vehicles have offset the decline in profit.

Like other legacy automakers attempting the transition to EVs from combustion engine vehicles, Ford is currently losing money.

The company’s EV sales have dropped by 2.8 percent from earlier this year.

The U.S. automaker gained 72 cents per share in the second quarter on an adjusted basis, up from 68 cents, and beat Wall Street expectations by exceeding the 55 cents per share forecast by analysts surveyed by Refinitiv.

Vehicle sales revenue rose by 12 percent to $42.4 billion, $2 billion more than expected.

The Detroit-based company stated that it beat its estimates even as losses from its Model e, or EV division, before interest and taxes (EBIT), grew to $1.1 billion, up from the $722 million in EBIT losses in the previous quarter.

Losses are expected to rise, at least in the short term, according to the automaker.

Ford’s Model e division expects an EBIT loss of $4.5 billion for all of 2023, up from its earlier forecast of a $3 billion loss for the year.

The goal of producing 600,000 EVs per year was also pushed back to some time in 2024, rather than by the end of this year.

Sales Hit by EV Trade War, High Production Prices

The automaker blamed an electric vehicle trade war as one of the primary reasons for Ford’s new loss estimate.

EV manufacturers such as Ford have followed industry leader Tesla’s move to cut prices at the beginning of the year. Tesla’s price cuts have undercut legacy automakers, causing the competitors’ EV inventories to pile up.

Ford CEO Jim Farley said that “pricing pressure [for EVs] has dramatically increased in the last 60 days.”

“EV price premiums over internal combustion vehicles fell more than $3,000 in the second quarter and nearly $5,000 in first half,”  Mr. Farley said.

“We expect the EV market to remain volatile until the winners and losers shake out.”

He confidently predicted that Ford “will be one of the winners.”

The basic Pro variant of Ford’s flagship all-electric F-150 Lightning pickup truck now carries a suggested retail price of $49,995 because of the recent price cuts, compared with the earlier $59,974 price tag.

The higher-end Platinum model now costs about 6.2 percent less, at $91,995.

Ford was able to slash the prices because of lower battery costs, following improvements in scale and a decline in battery raw material costs.

Raw material prices for batteries had earlier pushed up EV prices, but better sourcing options and supply deals have eased the cost of cobalt and lithium, which are crucial for EV batteries.

Ramping up production for the Lightning and other electric vehicles has also been an issue for Ford. The firm was only able to make 4,466 Lightnings in the second quarter, after a truck fire caused a temporary shutdown in production for several weeks, CNBC  reported.

Ford also temporarily closed its Rouge Electric Vehicle Center in Michigan in order to upgrade the plant to triple its annual production rate to 150,000 Lightnings by the fall.

Lightning Sales Not Doing Well as Expected

The automaker raised its full-year adjusted EBIT target of $11 billion to $12 billion, up from its earlier guidance of $9 billion to $11 billion.

It appears that many drivers still prefer internal combustion engines over battery-powered vehicles, which is leading to lower EV sales.

Ford’s Blue Division, which makes most of its classic gas-powered consumer vehicles, posted $2.3 billion in EBIT profit, while Ford Pro, the commercial vehicle division that sells its traditional internal combustion vehicles, contributed $2.4 billion.

The automaker lost $32,000 per EV sold in the second quarter, compared to a profit of $3,200 per vehicle sold by the company’s Blue Division.

Ford still expects to hit its target of 8 percent profits on its EVs business by 2026, Chief Financial Officer John Lawler says.

Mr. Farley said Ford’s next generation of EVs, which are still under development, will be far more profitable than its current EV inventory.

The F-150 Lighting is also encountering criticism from some commentators, who say the truck performs poorly at pulling or carrying cargo compared to Ford’s combustion-powered version.

“If a truck towing 3,500 pounds can’t even go 100 miles ... that is ridiculously stupid,” Tyler Hoover, host of the popular automotive YouTube channel Hoovie’s Garage, said in a video this year.

“This truck can’t do normal truck things.”

He also noted that his experience with the Lightning was a “complete and total disaster” because of the range of the towing capacity.

“You would be stopping every hour to recharge, which would take about 45 minutes a pop,” Mr. Hoover said, “and that is absolutely not practical.”

Labor Negotiations

The current contract between the United Auto Workers  (UAW) and the “Big Three” U.S. automakers—Ford, General Motors, and Stellantis, formerly known as Fiat Chrysler—expires on Sept. 14. New UAW President Shawn Fain has vowed to be aggressive, at a time of an emboldened labor movement across the country.

Ford hasn’t faced a UAW strike since 1976, unlike its two main rivals, while Mr. Farley told investors he thinks a deal can be reached without a work stoppage.

“When it comes to building in America and partnering with UAW, Ford stands out from all the other automakers and most other major industrial companies,” he said.

“So although these negotiations promise to be challenging, our goal is to build a bridge to the future with our employees based on mutual trust and a spirit of problem-solving with the UAW leadership, and of course, our incredible workforce.”

Still, Mr. Fain has said that the union is prepared to go on strike against all three companies.

He declined the traditional handshake across the bargaining table while posing for a photo op with each of the automaker CEOs at the start of negotiations; the union is opting for a “members’ handshake” between international UAW leaders and plant workers.

Mr. Fain has been highly critical of the automaker’s plans to shift to EVs in coming decades, which he fears will threaten jobs and ruin the industry.

UAW Demands Boost to Battery Workers’ Wages

EVs take about one-third fewer hours of work to assemble because of fewer moving parts; most of the time is spent building the large battery packs that power the vehicles.

However, the battery plants are mostly owned by joint ventures between the auto companies and battery makers, not the automakers themselves.

The factories pay workers roughly half the wages that UAW members receive at the Big Three’s existing auto plants.

The UAW criticized the $9.2 billion loan from the Biden administration that Ford and Korean battery maker SK received to finance the construction of three battery plants.

Mr. Fain pointed to strong earnings and profit outlook at Ford, GM, and Stellantis, which show that they could afford to meet UAW demands and pay workers at EV battery plants the same amount as those at auto plants.

“Like every Big Three automaker, Ford is thriving. These eye-popping numbers come on top of a decade of massive profits,” he said.

“The Big Three made a quarter-trillion dollars in North American profits over the last decade, but they denied UAW members our fair share. No Ford worker should wonder if the Blue Oval battery plants opening across the country will start a race to the bottom that undermines standards for all autoworkers.

“Seeing the billions that Ford is making, we know they can and must make things right for our workers and our communities.”

Ford officials didn’t respond by press time to a request by The Epoch Times for comment.