Ford Motor Co. (NYSE: F) said its investment in electric vehicles (EVs) would reach $30 billion. However, new federal rules that will eliminate the EV tax credit, which is as much as $7,500 per vehicle, will hit the company hard. Industry experts say that Ford is more dependent on the tax credit to make money because it already posts a loss on each EV it sells. The same experts point out that it will be much less of a problem for industry leader Tesla Inc. (NASDAQ: TSLA).
One theory is that what is good for Tesla is bad for other EV makers, which are the legacy manufacturers. Ford’s stock is already down 7% in the past year, while the S&P 500 is 26% higher. Tesla’s stock is up 100% over the same period.
Can Ford Stop the Bleeding?
Ford loses money on every electric vehicle.
Earlier this year, analysts estimated that Ford lost $130,000 for each EV it sold. Tesla, which has positive margins, has about 50% of the U.S. EV market. Ford has about 9%, which is slightly lower than Hyundai/Kia and GM.
Ford also faces a market that is not growing very much. Adoption of EVs is hampered by concerns about range, number of chargers, cost to buy a new EV, and tire wear. The fact that the price of gasoline is at a relatively low $3 a gallon does not help.
Ford said in 2021 that it would invest $30 billion in its EV initiatives by 2025. It also said its annual EV production run rate would be 600,000 per year by 2023 and 2 million by 2026. Since then, it has considerably slowed its EV production and shut down some EV production facilities.
Ford has also started to offer aggressive incentives to sell its EVs. This is usually a sign of a lack of demand. It is offering 0% financing for 72 months and a free home charger to some buyers of its Mustang Mach-E. It is offering a similar deal on its EV flagship F-150 Lightning, which is named after the gasoline-powered F-150. The gasoline-powered version has been the bestselling vehicle in the United States for over four decades.
If analysts are right about the effect of the elimination of the $7,500 on legacy car companies, Ford could face hundreds of millions of more losses in its EV business.
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