Ford’s Success Could Be Big for the EV Market
Ford’s electrification struggles–$3 billion loss, massive price hikes, and new manufacturing plants–and what they mean to the industry.
When Ford Motor Company announced in March that its electric vehicle (EV) division, called Model e, lost $2.1 billion in 2022 and is expected to lose another $3 billion this year, it provided ammunition to EV neigh sayers and critics. The losses are projected despite the growing popularity of the all-electric Mustang Mach-E crossover and F-150 Lightning full-size electric pickup truck. Investments in new manufacturing facilities in Tennessee and Kentucky; reconfiguring the Oakville, Ontario complex to build EVs in Canada; and significant battery and vehicle research and development costs all contributed to last year’s and this year’s losses.
Image used courtesy of Ford Motor Company
They All Lose Money (Except Tesla)
Losing money when starting a new electric vehicle company is not a surprise. It took Tesla 17 years before it finally showed a profit in 2020. Rivian, the only other company besides Ford currently building electric pickup trucks, showed a loss of $3.123 billion on deliveries of just over 20,000 vehicles in 2022. Luxury EV sedan maker Lucid lost $1.038 billion in 2022. General Motors doesn’t expect its EVs to be profitable until 2025.
Unlike the EV startups that only have their new battery-powered vehicles to provide sales, legacy manufacturers like Ford and GM can count on sales of traditional gasoline-powered cars and, more importantly, light trucks to boost the bottom line. Thus, despite Ford’s $2 billion loss on EVs last year, the company made $10.4 billion in 2022 and expects to make between $9 and $11 billion this year. GM made a record $14.5 billion last year, while Tesla made $12.6 in profits in 2022.
When Ford introduced its 2022 F-150 Lightning Pro electric pickup truck, the list price was just $41,769, leading many to believe the days of the affordable EV might finally be here. In August 2022, the truck cost rose to $48,769, then rose again in October to $53,769. In December 2022, the least expensive Ford F-150 Lightning Pro was $57,869, and in March, Ford announced another price hike to $61,869. In other words, the Ford F-150 Lightning Pro is now $20,100 more expensive than a year ago. The upmarket versions of the Lightning have had smaller increases, with the XLT extended range at $82,869, the Lariat extended range at $87,219, and the Platinum extended range coming in at a cool $99,069.
Ford F-150 Lightning. Image used courtesy of Ford Motor Company
Ford says the Lightning Pro price hikes have had everything to do with rising materials costs and other supply chain issues. Lithium, a critical raw material in the lithium-ion batteries used in EVs, set records for pricing in 2022, but those prices have dropped by more than 20 percent since the beginning of 2023, partly due to less demand for EVs than originally forecasted.
Ford Explorer EV. Image used courtesy of Ford Motor Company
Where Is Ford Building EVs?
In Europe, Ford has announced it will build an all-electric Explorer at its Cologne plant in Germany. The five-seat crossover SUV will be available with rear-wheel-drive or all-wheel-drive and is based on the Volkswagen ID.4 all-electric SUV, thanks to a development agreement between the two companies. The Explorer will only be sold in Europe.
Ford is also building a new assembly plant in Tennessee to produce 500,000 electric pickup trucks annually on a 3,600-acre location northeast of Memphis. The plant, scheduled to begin production in 2025, will employ approximately 6,000 people and is costing the company $5.6 billion to build. Ford’s second-generation electric truck, code-named Project T3, will be made at the facility beginning in 2025. Twin battery plants being built by Ford in Glendale, Kentucky, will also cost another $5.8 billion, while the renovation of the Oakville, Ontario plant is expected to cost $1.8 billion. Ford has also announced that it is investing $3.5 billion to build a battery plant in Marshall, Michigan, that will produce lithium-iron-phosphate (LFP) batteries to provide the company with a second battery chemistry option. Worldwide, Ford expects to spend more than $50 billion between 2022 and 2026 to develop and manufacture EVs.
In 1953, Charles Erwin Wilson, president of General Motors, known as “Engine Charlie Wilson” and soon to be the U.S. Secretary of Defense, said to a congressional committee that “what was good for our country was good for General Motors, and vice versa.” This statement is usually used as an example of the arrogance and hubris of industrial titans, but another way to look at it is to understand that there are a few major corporations that can serve as a canary in a coal mine to signal that things are about to change—for better or worse.
Today, one such canary is Ford Motor Company. While Ford is the second largest EV manufacturer in the U.S. (behind Tesla), it seems so far to be unable to capitalize on this position. With only two EV models available (the F-150 Lightning and Mustang Mach-E), eye-watering price hikes, no new EVs before 2025, and significant losses from its Model e electric division, the company isn’t exactly the poster child for electrification of transportation.
If, by 2026, however, the company begins to make real profits on its EVs, has a range of new electric models to fill out its portfolio, and has turned the corner on EV acceptance among its rank-and-file customers, it will signal that electrification in the U.S. will reach its potential in the coming decades as we are weaned from our addiction to fossil fuels. Ford has made a huge investment to make that happen, betting the company that it can be, if not the leader, at least among the most successful car companies in the new EV world. If Ford can succeed in its gamble, it will benefit all of us—a concept that might have made Engine Charlie Wilson proud.