Ford’s EV Woes
By: Sanjana Chavakula, BITS Newsletter Art Director
Bits by BITS: SPRING ’23, Issue №4
Ford faces a significant challenge in its electric vehicle (EV) sector. The company’s financial reports show it has been operating at a loss in this sector, despite the growing demand for electric cars.
The company’s recent earnings report reveals that its EV sector recorded a loss of $2.1 billion in 2022 and is set to incur an even more significant loss of $3 billion in 2023. This is a concerning trend for Ford, which has been investing significantly in the development of electric vehicles in recent years. The company had hoped that its EVs would drive growth and profitability in the coming years, but these losses have raised concerns about the viability of its strategy.
The loss in the EV sector is attributed to high development costs and manufacturing costs associated with these vehicles. This includes the cost of developing new technology, building new factories, and reconfiguring existing factories to accommodate EV production. Additionally, the price of batteries, an essential component of electric vehicles, remains high, making it difficult for Ford to profit from its EV sales.
Ford’s competitors, such as Tesla and General Motors, have also invested heavily in the development of electric vehicles. However, these companies have profited from their EV sales due to their early market entrance, innovation, and significant economies of scale.
Ford cut the price of some EV models, such as the Mustang Mach E, to address the loss in its EV sector to increase demand through consumer affordability. The company plans to launch several new electric models, including an electric version of its popular F-150 pickup truck, the best-selling vehicle in the United States for several years.
Ford’s management remains optimistic about the company’s future in the EV sector. Ford’s CEO, Jim Farley, has stated that the transition to electric vehicles is a long-term trend that will ultimately benefit the company. During the transition to focusing on EVs, there needed to be more aware of the costs associated with these vehicles. Still, as time progresses, they should better understand the technology and the associated costs. He believes the company’s investment in EVs will pay off in the long run as consumers increasingly shift towards electric cars in the coming years.
Sources:
https://www.cnbc.com/2023/03/23/ford-2022-unit-financials.html
