Ford Dials Back Electric Vehicle Battery Orders
Ford isn’t really putting brakes on its electric dreams just yet, but there’s no doubt the company is doing some strategic rethinking. The latest industry reports suggest Ford is scaling back on its battery orders. It shouldn’t come as a surprise; the company has been losing money on every electric vehicle it makes. Don’t worry, though. It’s not the time to hit the panic button yet. There’s more to this story than meets the eye.
Ford Loses A Fortune Every Time It Sells Electric Car
Ford named its electric division Model E, and this part of the company has been burning through cash faster than the banks can print it. According to the latest figures, the company has lost $100,000 on every electric car it sold in the first quarter of this year. Is this the end of Ford’s EV adventure?
The apparent significant losses turn out to be a bit of an accounting trick. The high development costs of Ford’s new EV platform, the costs of developing new batteries, and the software to run future EVs are bundled together into the current year’s expenses. Rather than spreading them across the next 10 or 15 years when the EVs are being manufactured at full speed, all the costs are being squeezed into the short window of time while Ford is trying to ramp up production.
Blue Oval Bets Big On Future EVs
The $100,000 loss per car looks enormous, but by the same token, starting next year, every EV sold would be profitable – that’s not how we count profit and loss. Ford isn’t distracted by the accounting tactics and focuses on the upcoming EV platforms. We are talking about large and small vehicles that the company believes will be highly profitable.
So, what is happening with the battery orders? There’s no hiding the fact that the EV market isn’t growing as fast as the company initially predicted. New buyers aren’t exactly lining up, but Ford is still managing to double its sales from the year before. The development costs make it hard for the manufacturer to turn a profit, but that doesn’t stop the company from investing even more.
John Lawler, Ford’s CFO, declared that the Model E division needed to “stand on its own.” That means becoming profitable, and while the electric journey may have a few unexpected twists and turns, Ford is committed to making it to the finish line.