Ford said on Thursday that it expects to lose about $3 billion this year on its electric vehicle business. The company started selling its first electric car in 2020 and says it expects its EV business will start turning a profit by 2026.
Launching one new car (even just a new gas-powered one) is always expensive for automakers, “because they get knocked off their efficiencies of producing,” said Tyson Jominy at J.D. Power.
The auto industry is all about efficiency, and churning out a whole lot of the same or similar cars is key to how companies make money.
“Like Henry Ford said, ‘You can get any Model T you want, so long as it’s black.’ You know that was for efficiency reasons, right?” Jominy said.
So launching a whole new division to make a whole new kind of car can get to be kind of a bumpy ride.
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“You have to think about Ford Model E — that EV business — effectively as a startup within Ford,” said T.R. Reid, a spokesperson for Ford.
The making of gas-powered cars and EVS “is significantly different,” he added.
For all traditional car makers, getting into the electric vehicle market requires massive investment, according to Michelle Krebs at Cox Automotive.
“It’s all new. They’re teaching workers how to build these, they’re building new plants — that’s a huge part of the expense,” she said. “Every automaker is building new assembly plants, new battery production plants, and those aren’t cheap.”
The time that it’s taking to make this transition and get customers on board is also costing automakers money, said Jessika Trancik, a professor at the Institute for Data, Systems, and Society at MIT. “Really understanding what consumers are looking for and building up momentum on the demand side,” she said.
Right now, just 6% of cars being sold are electric, so there’s a long way to go. But this is all just part of the process of making something new, Trancik said. It’s not unique to electric cars.
“In general, when we look at really the development of any technology, what you see is that it typically requires an upfront investment in research and development,” she said.
And that, Trancik added, tends to pay off many times over down the line.