Ford loses billions on electric cars but embraces hybrids.
Ford Expects $4.5 Billion Loss from Electric Vehicles
Ford Motor Company has announced that it expects to lose a staggering $4.5 billion from its electric vehicles (EVs) this year, according to its second-quarter earnings report released on Thursday.
The Michigan-based automaker revealed that its all-electric vehicle division, known as ”Ford Model e,” has already incurred losses of over $2.8 billion in the first two quarters of this year. In the second quarter alone, the division lost $1.8 billion, equivalent to approximately $32,000 for every EV Ford has sold.
Ford attributes these losses to various factors, including the “pricing environment, disciplined investments in new products and capacity, and other costs.” The company has faced challenges in competing with Tesla, which lowered prices for its electric models earlier this year.
Initially, Ford projected a loss of around $3 billion from electric vehicles this year. However, the company revised this estimate to $4.5 billion last week.
Hybrid Models and Customer Preferences
Despite the disappointing numbers, Ford remains committed to electric vehicles. In the meantime, the company is focusing on developing new hybrid model cars that can operate in either electric or gas mode.
CEO Jim Farley stated that Ford plans to introduce more hybrid systems, leveraging their efficiency for specific duty cycles and enhancing capabilities through battery technology.
Farley expressed surprise at the popularity of the hybrid model for the F-150 pickup truck, with over 10% of Ford buyers opting for the hybrid version. Additionally, 56% of customers who purchased Ford’s Maverick pickup truck chose the hybrid variant.
Some of Ford’s hybrids even offer unique features, such as the ability to plug power tools into the car’s battery or connect a refrigerator for a tailgate party.
Long-Term Profitability and Industry Trends
While Ford acknowledges the current losses from electric vehicles, the company remains optimistic about the future. Ford sold a total of 34,000 electric vehicles and hybrids combined in the second quarter of this year, with 61,575 electric vehicles sold in the U.S. throughout last year.
Experts suggest that it typically takes around 100,000 cars sold to start turning a profit on a new model. Despite this, Ford highlights that its electric vehicle revenue has increased by 39% and emphasizes its commitment to maintaining competitive prices for electric cars.
Although Ford’s electric vehicle division faces challenges, the company continues to generate substantial profits from other sectors, with a net income of $1.9 billion and $45 billion in revenue during the second quarter.
The automobile industry as a whole has been rapidly adapting to potential government regulations that would require increased production of electric cars. Car companies have invested billions of dollars in developing electric models.
In April, the Biden administration’s Environmental Protection Agency proposed a requirement to cut emissions by 56% and have 67% of new vehicles be electric by 2032. The Department of Energy has also proposed regulations to push car makers towards electric vehicles, despite concerns from some manufacturers about potential penalties.
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