Wtf are these crackheads doing? EV’s are insanely simple machines compared to combustion ones. How could you ever fuck your production cost so much as to get losses like that. This feels like a manufactured failure to get bailed out or to stir public opinion on the whole china EV situation.
How could you ever fuck your production cost so much as to get losses like that.
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.
I dont think it would be fair to call that a loss per vehicle then.
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.
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
it’s* a per-vehicle cost
Ford has been mismanaged and only kept alive through BS, anticonsumer protectionist policies for decades at this point. It’s my opinion that they genuinely don’t even know how to run a successful business because “going under” hasn’t been a real concern for them for longer than most of the executives have been at the company.
This is why the news is fixated on banning Chinese cars, because our companies suck
Somewhat Ironically, the tariff increase against Chinese cars is mostly for political show. There are virtually no Chinese cars being sold in the US, and those that are sold are not chinese brands but American brands (e.g. Buick, Lincoln) manufactured in China. The reason there are no Chinese brands on the market is that the existing 25% tariff is already enough to make it very unattractive.
However Biden is hoping to win the support of United Auto Workers and the like, who are all afraid of losing their jobs to Chinese workers getting paid a tenth of what they make or w/e. Trump has been using the same talking points, suggesting tariffs on Chinese cars built in Mexico (I don’t think that’s a real thing at this point, just something that could happen). It’s all political theater.
I bet there’s some magical tax system in play here.
1 billion in imaginary r&d costs split over 1 years sales.
This was the whole point of restructuring. Gaming our tax and legal system to maximize profits. Put all the losses into your LLC.
It’s basically the entire year cost divided by cars sold or something like that yes.
It’s a terrible way to do it.
For example, pre pandemic, Ford was actually just gross margin positive on the sale of the Mach E, which was quite impressive, but it was overall a loss due to all the R&D.
This is the same attack people used against Tesla early on as well. Since the Model S, Tesla was nearly always gross margin positive on their vehicles, but because of the massive R&D were still in the red.
At any moment, Tesla could have dramatically slowed growth and been profitable sooner, but you don’t grow and expand that way, so it was years of Tesla loses $X per car.
It was terrible then, it’s terrible now, it’ll always be terrible.
What do you mean Pre Pandemic Mach E? Vehicle released December 2020 as a 21 model year.
Sorry my bad then, before the supply chain got Uber fucked by the pandemic.
It was originally gross margin positive. Then the supply chains for fucked and it was no longer gross margin positive.
Then the price cuts started happening after the supply chains resolved and it couldn’t get back there for awhile.
I don’t know if it is or isn’t GM positive today.
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What the heck are they doing wrong? If they sell an EV for 70k and still make a 130k loss on it, what are they doing to make the production cost 200k in the first place?
Buying and running the tools it takes to make the EV, running the factories and training the workers are all very expensive. So the losses implies they projected a LOT higher volume than they’re currently producing so all the expensive equipment sitting idle is spread over the smaller volume of cars. These are called NRE (non-recoverable expenses).
So the losses are not production losses, but a complete failure in the projection? OK, quite possible.
The problem they have is they’re trying to sell it for 200k. Maybe they didn’t try and sell it to so much money they’d actually make money paradoxically.
It’s expensive moving to the next version of the product that the consumer demands?
Running an innovative business is not all fields of flowers and line-go-up record profit margins?
Who could possibly have guessed other than literally every textbook on economics, finance, innovation or business accounting?
/s
Ford needs to put on it’s big boy pants and figure this out. There’s only so much gas in the ground.
put on its* big-boy pants
Relevant user name.
I do English good. But my keyboard doesn’t two well.
Its no tits
Ok how about I don’t buy one then and they can just give me $120k instead. Win-win.
That’s what happens when you have to be a loss-leader to secure your position in the market. Even when the government steps in to protect you you still claim it’s a loss even though you’ve been crowned leader.
Is Ford the leader in the EV market?
In reality no, they are not.
I know a few people that work in a Ford plant. Just a week ago, they shut down to retool the place for electric vehicles. Initially expected to take eight months, it’s now about two years.
They might have cancelled some orders from a specific supplier, but it’s not like Ford is turning away from EVs as a whole.
I think it’s funny this news comes out just after they add a 100% tariff to Chinese EVs. I’d of course not want to see US automotive industry destroyed by cheap Chinese EVs but there’s no way the US cannot compete
