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Ford cancels EV battery orders as losses widen to $130,000 per vehicle sold
(www.notebookcheck.net)
this post was submitted on 13 May 2024
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[Dormant] Electric Vehicles
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It's because there is a lot of fixed cost being divided into a relatively small number of units. For instance "Ford Blue" is Ford's ICE division and in Q1 it moved about 626,000 units while "Ford Model e" is Ford's EV division and it only moved about 10,000 units in Q1. Source.
So if Ford Blue spends a Billion dollars that's a per vehicle cost of $1,597. If Ford Model e spends a Billion dollars its a per vehicle cost of $100,000.
So what would cost a Billion dollar? Well, how about 3 new battery factories plus an EV assembly factory that cost something like 7 Billion dollars?
That's not nearly all of it either. In May of 2021 Ford said that would spend something like 30 Billion by 2025 (that's next year!) to increase EV production.
So yeah, Ford has spent the GDP of some small countries shifting to EV production and when you divide those very large sums into a very small number of vehicles you get upside down real quick.
Agreed, and the proper response here is to increase volumes to amortize the costs across more units, not cut back production.
Unless your goal is to take a loss and write off your taxes for the construction costs of the new factories, only to increase production next year.
I think the problem for Ford is that they bet on economic improvements that didn’t manifest. Both their current EVs are “premium” models, and that market is tapped, especially with new car loans costing 8%, and people can’t afford housing and groceries and a car payment.
Lightly used MachEs sell well at $25k. Which tells you that there is a price point for a new Focus electric. F150s are work trucks, not status vehicles, so more XL trims and fewer platinums, or better yet electric mavericks and rangers.
They should make a Lincoln MK Lightning if they want the truck to stay premium, but aim Fords to the working class like always and price them accordingly.
I dont think it would be fair to call that a loss per vehicle then. When they built their first vehicles long long ago they also mustve been in the red for a while. Thats called "investing in company infrastructure" and not "selling at a loss".
The money is paid, the loss of money is over. Surely they are making a per vehicle profit already and it will just take some time to go overall positive for their investment.
It's common to break down the cost of Fixed Asset Investment to per unit produced by the investment. I won't comment on whether it's "fair" or not but it is common and it's how the article arrived at this eye popping "loss per vehicle" number.
This is why the incremental cost of a unit are often a better measure for longer term profitability and decision making than the unit average cost, especially when you aren't factoring in the market size and ability to repurpose sunk costs in that unit average cost.
Exactly, which is where the term "economies of scale" comes from.
More units = more economy
Ok i guess thats how it is, still weird because you rarely see a per product profit value in this sort of format. Seems like they enjoy crying over losses and staying silent over profits.
It's not in the actual report put out by Ford. It's a creation of the Journalist who wrote the article. So you are unhappy with Julian van der Merwe, the author of the article.
Lol, the dude is literally a neck beard.
Cowboy Bebop rocks tho
That's how accounting works. You don't get to change the federally mandated accounting practices.
It's called GAAP
https://www.investopedia.com/terms/g/gaap.asp