Yahoo Autos Ford Loses $44,000 On Every EV Sells As It Switches To Hybrids
Good morning! It’s Monday, August 26, 2024, and this is The Morning Shift, your daily roundup of the top automotive headlines from around the world, in one place. Here are the important stories you need to know.
1st Gear: Ford’s New EV Plan Means More Hybrids
Last week, we reported that Ford was canceling its plans for a three-row electric crossover as part of an adjustment to its electric strategy because of cooling demand for EVs. Now we are getting a better look at just how much that strategy is changing and what it’ll end up costing The Blue Oval. Chiefly, Ford is expected to take on $1.9 billion in related charges and write-downs.
The cancelation of this three-row EV comes after Ford said in the Spring that it would be delaying plans for the model by two years to 2027. It also comes during mounting pressure to restore aggressive discounts to get their current EVs off dealer lots.
All of this means more hybrids are coming to Ford’s lineup. From the Wall Street Journal:
Ford instead will offer hybrid gas-electric versions of future large, three-row SUVs, a popular vehicle category that includes the brand’s Explorer and Expedition nameplates.
The company’s moves are the latest example of automakers unwinding EV-investment plans they made years ago, when it looked like there was big untapped consumer demand for battery-powered models. There has been more hesitancy among car shoppers than auto executives initially expected, with surveys showing concerns about high prices and finding places to charge.
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Ford also pushed back the launch of a new electric pickup truck by one year, until 2027, the second time it has pushed back the timeline. In addition, Ford said it would trim its capital spending on fully electric vehicles to about 30% of its budget, from 40%.
“Based on where the market is and where the customer is, we will pivot and adjust and make those tough decisions,” Ford Chief Financial Officer John Lawler said.
Ford said its EV business is on track to lose an eye-watering $5 billion this year alone. In the three-month period ending in June, the automaker lost about $44,000 on every electric vehicle it sold. That is not sustainable.
The automaker said it would take a special, non-cash charge of $400 million to write down expenses related to the cancelation of the electric three-row. The move may result in additional expenses of $1.5 billion. It would be reflected as special items in future quarters.
Executives have said the company is trying to reduce the losses on its current EV lineup while making sure future offerings turn a profit.
Carmakers are trying to strike a tricky balance on electric vehicles. Tougher tailpipe-emissions rules, along with the rapid rise of Chinese EV makers, are pressuring them to invest in the technology. But consumer interest in EVs has waned after a burst of enthusiasm.
For example, while Ford is recalibrating its plans to include more hybrids, it also is moving ahead with the rollout of several full EVs. It will start making an electric commercial van in 2026 and two new pickup trucks a year later.
One of the trucks will be a midsize pickup, built using a new, lower-cost EV system that has been under development for nearly two years by a team of about 100 Ford engineers in Irvine, Calif. Led by former Tesla executive Alan Clarke, that project is designed to produce several electric models that Ford says will be profitable and allow the company to compete with Chinese EV makers.
“We believe that the fitness of the Chinese in EVs will eventually wash over our entire industry in all regions,” Farley told analysts last month.
Ford obviously isn’t alone in this move to pull back on EV plans because of lower-than-expected demand. General Motors has acted similarly.
Sure, fully electric vehicle sales rose 6.8 percent through the first half of the year, WSJ reports, but that represents a sharp deceleration from nearly 50 percent growth in 2023. At the same time, sales of hybrids have risen sharply over the past year.
I don’t know, man. If I was Ford and I was losing $44,000 per vehicle, I’d probably try something new as well.
2nd Gear: Tesla’s Price Cuts Helping Used EV Market
For the most part, Telsa has been lowering the prices of its cars fairly steadily for the last year or so. That’s had the generally positive effect of lowering used electric vehicle prices all over the place, including directly across from Tesla’s Fremont factory in the San Francisco Bay area. From Bloomberg:
CarMax Inc.’s superstore in Fremont, California, has seen a stream of shoppers more willing than ever to kick the tires on an electric vehicle. While Tesla’s price cuts aren’t all that’s driving the foot traffic — the range of pre-owned plug-in models to choose from is steadily broadening — Elon Musk’s early dominance of the market for new EVs has translated to serious sway over used-car dynamics.
“We’ve seen a really good amount of interest,” Henry Melendez said in a phone interview. The CarMax general manager said customers have told him they wanted to seize on incentives and falling prices. “They’ve always wanted to get into an electric vehicle, but it just wasn’t quite as affordable.”
The trend taking place on Tesla’s doorstep in Fremont is playing