In case you missed it, Ford Motor Company told investors last week that its electric vehicles division managed to loseover $72,000 per unit sold during the 2nd quarter of 2023. That is not a typo, and things only seem to be getting worse for the venerable automaker: The 2nd quarter loss is $6,000 more than the $66,000 per unit sold during the first quarter of the year.
Overall, Ford reported an operating loss of $1.08 billion for Q2, and warned investors that its’ EV division — which it calls Ford Model e — would likely lose an estimated $4.5 billion for the year. That is a big increase from its Q1 estimate for its projected annual loss, and compares to the $2.2 billion loss Ford Model e reported for 2022.
Truly, things seem to be getting worse, not better, at Ford. Yet, the company’s management also projects that it will be making 600,000 EVs annually by 2024, despite having sold only 14,843 units during the 2nd quarter. Of course, Ford said it will be “making” 600,000 units next year, not actually “selling” those units.
If this all sounds like an unsustainable business model to you, well, you are not alone. But frankly, Ford is not alone, either. GM, the other big U.S. automaker convinced by the Biden administration to rush whole hog into major new investments in EV infrastructure on the promise of huge federal subsidies to come, is reporting similar horrible results for 2023. The company announced in June that it had sold just 47 of its electric Hummer model SUVs during Q2 of this year, and only 1,348 of its Cadillac Lyriq model.
These are the results GM is coming up with fully 27 years after it introduced its first EV model, the EV1, 13 years after it introduced the Chevy Volt, and 7 years after it first produced the Chevy Bolt. Perhaps the fact that GM has now pulled the plug on every one of those previous EV models should be taken as a cautionary tale by other automakers looking to travel a similar path.
Back in March, when Ford Model e’s terrible Q1 results were becoming clear, CFO John Lawler put the best face on things he could, saying, “Ford Model e is an EV startup within Ford. As everyone knows, EV startups lose money while they invest in capabilities, develop knowledge, build volume and gain share.” That is all certainly true, but the question for Ford and GM becomes whether they will be able to continue offsetting such massive losses with profits from their traditional internal combustion engine (ICE) sales even as the federal government implements new mileage and tailpipe emissions standards designed to force those cars off the market.
Timing is critical in all of this. The business model at play relies on massive consumer adoption of extremely expensive EVs priced well above comparable ICE models even as the government is forcing those ICE vehicles off the market. The average price for an EV in the U.S. surpassed $66,000 earlier this year, compared to an average price of about $45,000 for ICE vehicles. But what percentage of U.S. consumers can afford to buy a $66,000 automobile?
The other big conundrum automakers face is how and where they will source the critical energy minerals that go into making EV batteries and other components. President Biden promised in 2021 to mount a “whole of government” effort to secure supplies and supply chains for those minerals, but precious little progress has been made. Despite the paucity of real progress, automakers face extremely short time frames for ramping up their EV sales before the government forces their profitable ICE models off the market.
What it all seems to be adding up to is a rising likelihood that U.S. automakers, who were so happy to leap into these major investments in EV capacity in 2021 based on Biden’s siren song of subsidies and tax breaks, seem destined to ultimately discover that the federal government is not the reliable partner they hoped it would become. It’s a painful lesson many other companies have learned before them.
David Blackmon is an energy writer and consultant based in Texas. He spent 40 years in the oil and gas business, where he specialized in public policy and communications.
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