FORD LOSES $2.5 BILLION IN 2024 WITH MODEL E DIVISION
In a shocking turn of events, Ford has reported a staggering loss of $2.5 billion in 2024 with its Model E division, responsible for electric vehicles (EVs). This comes as a surprise considering the growing popularity of EVs in the market. It seems that Ford is not the only one facing financial challenges in the EV industry.
CHINESE CARMARKERS LEAD THE WAY
Interestingly, it appears that only two Chinese carmakers, BYD and Li Auto, are actually making money from selling EVs. This raises questions about the strategies employed by other automakers and their ability to adapt to the electrification trend. It is evident that the landscape of the automotive industry is rapidly changing.
AUTOMAKERS ALTERING THEIR ELECTRIFICATION PLANS
The news is filled with reports of automakers revising their plans for electrification. Volvo, for instance, has decided against becoming an exclusively EV maker by 2030. Similarly, Mercedes-Benz has allegedly canceled the development of a new electric platform for its EQS and EQE models. The MB.EA Large architecture, originally set to debut in 2028, will no longer be pursued. These changes in direction highlight the challenges faced by established automakers in transitioning to EVs.
TESLA’S SUCCESS SHEDS LIGHT ON THE STRUGGLES OF OTHERS
The success of Tesla, a relatively young company, in turning massive profits from selling EVs raises questions about the competence of other automakers. If Tesla can achieve profitability, why are others struggling to do the same? The answer lies in the complexity of the EV market and the time it takes to overcome the hurdles associated with it.
TESLA’S JOURNEY TO PROFITABILITY
It is important to note that Tesla was founded in 2003, but it took the company 17 years to achieve its first profitable year in 2020. This demonstrates the challenges faced by EV makers in generating profits. Some may argue that Tesla’s success is due to its low-volume production and the need to reach mass production without going bankrupt. However, this perspective oversimplifies the difficulties faced by legacy automakers in transitioning to EVs.
CONCLUSION
As more automakers grapple with the complexities of the EV market, it becomes clear that profitability is not easily achieved. The challenges faced by Ford and other companies highlight the need for a comprehensive strategy and long-term vision in the electrification journey. Only time will tell if these automakers can overcome the obstacles and find success in the EV industry.
First of all, let’s ask if Tesla is really profitable. The company received billions in carbon credits, which may explain part of its alleged profitability. However, when we look at its financial numbers, things don’t add up. Tesla applied massive discounts to its cars, claiming to share cost-savings with customers. But these discounts were actually higher than the profits per unit. To achieve this from one quarter to the next, Tesla would have needed a significant cost reduction, which is nearly impossible considering the high cost of battery packs. And even if it were achievable, another question arises: how did the company manage to deliver such profits?
Tesla has a development process for its vehicles that has been nicknamed “deliver now, fix later.” This strategy was revealed by Philippe Chain, the former Tesla VP for quality. He wanted to conduct more road tests with the Model S before deliveries began, but Elon Musk refused. Musk believed that any issues could be fixed through recalls or over-the-air updates. No other automaker would take such a risk, which means that development costs for Tesla’s competition are much higher. We can see evidence of this strategy still being used with the Cybertruck and its numerous recalls. So, if Tesla played by the same rules, would it still be profitable?
Now, let’s consider other car companies. Most of them aren’t profitable. BYD, for example, has managed to achieve profitability because it produces its own cells and has a fast development process. Toyota even partnered with the Chinese brand after discovering this. Li Auto, on the other hand, mostly sells plug-in hybrids. It’s likely that they wouldn’t be profitable if they solely sold battery electric vehicles (BEVs).
It’s been ten years since Marchionne urged customers not to buy the 500e, and it seems like we’re in a similar situation with most modern electric vehicles. The main difference now is that automakers are aggressively promoting these BEVs through heavy advertisement campaigns. However, their quarterly reports continue to show significant losses. This is the very definition of compliance cars. Until this changes, it’s an inescapable conclusion.
