Ford lost tens of thousands of dollars per electric vehicle sold in the first quarter of 2023, as the division remained on track for roughly $3 billion in yearly losses, according to the company’s Tuesday evening earnings report.
Ford’s electric vehicle division — which was separated from its traditional gas and professional-grade vehicle departments in a late March reorganization — lost $722 million in the first three months of 2023, while selling just 12,000 units, according to the company’s first quarter earnings report. This amounts to a roughly $60,167 loss for each vehicle sold, according to calculations made by the Daily Caller News Foundation. (RELATED: Major Automaker Expects It Will Hemorrhage Billions From Its Electric Vehicle Business)
“Because the auto industry is very capital intensive and has high fixed costs that need to be spread out over thousands of units, it is not uncommon to have steep losses initially which are followed by profits,” Heritage Foundation economist E.J. Antoni told the Daily Caller News Foundation. “Imagine, for instance, needing to retool a factory and rebuild an assembly line to build different vehicles. That is much more expensive than the revenue from the first few vehicles that are produced.”
Despite this, however, Antoni characterized the decision to go “all-in” on electric vehicles as a “tremendous risk” that required ongoing support from government subsidies. Private analysts expect that the total cost of the green manufacturing subsidies offered by President Joe Biden’s Inflation Reduction Act will top $1 trillion, with subsidies for the electric vehicle battery packs alone topping $130 billion.
EV EBIT margin took a nosedive in Q1. pic.twitter.com/aOEYZexgue
— Sawyer Merritt (@SawyerMerritt) May 2, 2023
The company cited production issues with the Mustang Mach-E SUV and the F-150 Lightning pickup truck for the low level of production, which was 32% lower than the same time in 2022. Ford expects that the division, which it characterizes as operating “like a startup,” will be on track to produce at a rate of 600,000 units per year by the end of 2023.
Compared to the same quarter last year, Model e’s $700 million in revenue represented a 27% decline, while total losses were more than twice the $342 million lost last year. Ford further cut the price of the Mach-E by $3.750 on Tuesday, bringing its sticker price as low as $43,000 in some cases as the company continues its ongoing price war with Tesla, according to CNN.
The company expects that its electric vehicle division will begin turning a profit by the end of 2024 and have an 8% profit margin by 2026, according to Reuters. CFO John Lawler described these targets as “totally realistic” in the context of the company’s “aggressive” cost-cutting moves.
Overall, the company posted a $1.8 billion profit, beating expectations, although its year-round forecast of $9 billion to $11 billion in profits remained unaffected, according to Bloomberg.
Ford did not immediately respond to a Daily Caller News Foundation request for comment.
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