Ford Wanted to Compete With Tesla in the Electric Car Market. It’s Facing an Issue Called ‘A $5 Billion Loss’

In March 2022, Ford made a significant announcement: The company was splitting into two separate units to focus on the transition to electric cars. According to CEO Jim Farley, it was “one of the biggest changes in our history.” In addition, the company planned to invest $50 billion by 2026 for this endeavor.

The split resulted in the creation of Ford Model e, a division dedicated exclusively to electric cars and software development. On the other side, Ford Blue would handle most of the company’s operations initially, gradually transitioning over the coming years.

The primary goal was clear: to catch up with Tesla. The approach was risky. As The New York Times reported, Ford had high confidence that some of its cars would be able to outperform Elon Musk’s vehicles. When it came to the F-150 Lightning, the electric version of Ford’s famous pickup truck, Farley emphasized the importance of its success, stating that the entire company’s fate depended on it.

Less Enthusiasm, Million-Dollar Losses

Over time, however, the team at Ford has been losing its spirit, at least in terms of numbers.

Although Farley has continued to support the move towards electric cars, the reality is that sales of electric vehicles in the U.S., Ford’s main market, are struggling. This isn’t helping balance the two units of the company, Ford Blue and Ford Model e, which are essential for Ford’s overall financial health.

The latest financial results once again highlighted the challenges facing Ford Model e, the company’s division dedicated to electric cars, which currently is the smallest division, according to Electrive.

During the second quarter, Ford only sold 26,000 all-electric units, a notably smaller number compared to the 741,000 vehicles with combustion engines that were sold during the same period. This 26% drop compared to the previous year is particularly concerning.

A decline in sales has directly impacted the division’s bottom line. In Q2, Ford reported a loss of $1.1 billion from its electric cars and maintains its year-end outlook of a $5 billion loss in this division.

Taking a broader view, Ford sold 22% fewer vehicles and generated $1.3 billion in sales revenue in the first six months of the year, half of what it made in the same period in 2023. The company reported a total loss of $2.46 billion from January 1 to June 30.

Ford attributes its biggest problem to the reduction in prices of its electric models, despite cutting the costs of its EVs by $400 million. With this move, the company intended to boost sales but it has instead led to ongoing financial losses. Following the announcement, Ford shares dropped by over 18%.

The sales of electric cars in the U.S. are increasing at a very slow rate. Farley has urged the market to “get back in love” with smaller cars and has announced plans to launch a profitable electric car priced at $30,000 within the next two and a half years.

However, electric cars are facing challenges in the U.S. due to a lack of high-powered and reliable charging points, especially in a country where driving long distances is part of daily life. Tesla leads in this area with its own reliable charging network and has prompted other manufacturers, including Ford, to adopt its standard.

In a country where large cars are popular, electric cars struggle to compete due to their higher prices and limited range, especially when compared to their larger counterparts. Additionally, there’s been increased political debate surrounding electric cars in recent months.

This article was written by Alberto de la Torre and originally published in Spanish on Xataka.

Image | Ford

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