> The losses go far beyond the cost of building and selling those 10,000 cars, according to Ford. Instead the losses include hundreds of millions being spent on research and development of the next generation of EVs for Ford. Those investments are years away from paying off.
That's missing the forest for the trees. They're losing money on every vehicle they sell. There needs to be a lot more R&D to get the vehicles to a price point that consumers will purchase them and they can actually make a profit. Thus far, their R&D has been a net loss for the company.
I'm sure at least a good portion of it will pay off eventually, but there's no guarantee of how much, or how long it will take.
I'm not sure if that's necessarily a fair assessment as Ford's laid out plan to get from the current 40% loss to 8% profit is pretty reasonable.
Of that 40 percentage points, 20 of them are directly attributable to economies of scale. As they sell additional units those costs will amortize out. i.e. the more they sell the less they lose.
They expect to pick up another 15 points via engineering changes that will unify a lot of parts between the different product lines. They apparently initially just focused on shipping the vehicles so each model has a lot of bespoke parts that could semi-trivially be reworked to de-duplicate them between product lines.
That gets you down to 5% losses. The bulk of the remaining 13 points they expect to pick up via battery design improvements and cost reductions in their supply chain.
And their stated deadline for this is the end of 2026 so it's not exactly like they intend this to take ages. Rather they expect to achieve this within a handful of model revisions.
If you lose 4 billion on the first car you sell and 40k on the 10,000th that doesn’t necessarily mean you’re going to lose money on the 1,000,000th one you sell even if nothing else changes.
People talk about EV’s underperforming etc, but there’re still steady year over year increases. They are just about to break 10% market share, and everyone sees the writing on the wall.
Ford is cutting back production because they aren't seeing the necessary growth. Even if nothing else changes, they will continue to lose money selling them.
> They're losing money on every vehicle they sell.
Unless I’m missing it, neither article shows the profit/loss of manufacturing the vehicle vs sales revenue of the vehicle itself, so we can’t know that. Even if it’s true, it’s not unusual when bringing up a new product as you optimise for scale.
> There needs to be a lot more R&D to get the vehicles to a price point that consumers will purchase them and they can actually make a profit.
Does there? Maybe all of the retooling and new assembly lines are done, all the designs are finished? Maybe not and they still have R&D budget left? They are also not operating in isolation - If another company comes out with a cheaper battery then Ford can just buy it with minimal R&D, they don’t have to invent everything themselves.
> Thus far, their R&D has been a net loss for the company.
I mean, that’s R&D? It’s an investment. The alternative is to do nothing and end up like Nokia. Even if they are losing money on every vehicle, “shipping fast” is better than not shipping at all and they can control the numbers. Most people want the 2nd or 3rd gen when all of the bugs have been worked out, so having units on the road lets you learn what doesn’t work.
R&D are costs which a company needs to pay to get a vehicle on the road. Whether the car, as a whole, is making a loss or not depends on whether it can pay for the R&D costs over it's lifetime.
Car production is very capital intensive, besides R&D you have the retooling of entire production lines as another major cost factor.
The real question is whether the sales of these cars will eventually pay for the capital expended. At current EV sales number that is not going to happen, but manufacturers like Ford obviously speculate on large future growth in demand for EVs.
At least in the EU expected EV growth was much larger than actual EV growth.
> R&D are costs which a company needs to pay to get a vehicle on the road. Whether the car, as a whole, is making a loss or not depends on whether it can pay for the R&D costs over its lifetime.
You’d think this “101” information would not be needed to be said here, but here we are having to explain it.
> At least in the EU expected EV growth was much larger than actual EV growth.
We should also try to quantify things, because using terms like “much” in italics when it comes to EVs has been so misused that people don’t trust it anymore. We were told that they are much heavier, but then this turns out to be as little as 10-15%. We were told that they lose massive range in the winter, but it can be the same ballpark of 10-15%.
Hard to say. Profit per sale doesn't tell the whole story. Mach E and F150 Lightning help Ford offset the CAFE contribution of their high margin gas guzzling cars and trucks. How much would they be making on Mustangs if they had to pay CAFE penalties?
I'd be interested to know the profit/CAFE for each Ford model and how much they are spending on R&D for EV vs ICE.
Lots of new technology ventures lose money at first; that's necessary. That includes other electric car manufacturers.
You sell what you can and at least offset costs somewhat, and also build marketshare, build infrastructure (dealerships, etc.), and learn invaluable lessons about everything from sales to service to reliability to performance, etc.
Or wait until you have the perfect machine that makes you profitable, then begin sales. That doesn't make any sense.
https://www.automotivedive.com/news/fords-ev-losses-q2-earni...