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By Ian Krietzberg
October 27,
2023
Former Ford CEO has a blunt warning
for the electric vehicle industry
Ford's EV business posted a big loss for the third
quarter.
The strike against Ford (F)
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Free Report may be over, but the company's electric vehicle
woes are far from solved. The entire auto industry, grappling with steadily
softening EV demand over cost and existential infrastructure
challenges, is beginning to pull back its efforts to grow the sector.
Tesla (TSLA)
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Free Report, of course, is dealing
with falling sales figures and gross margins amid an ongoing price
war whose aim is to entice customers to go electric. General Motors (GM)
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Free Report, still locked in the throes of the auto strike,
canceled an earlier plan with Honda (HNDAF) to
develop an affordable EV, citing the results of "extensive studies."
GM additionally ditched a target it once had to make 400,000 EVs by
mid-2024 and went on to push back the production of its coming EV
lineup.
The production delay, according to CEO Mary Barra, will “make the
trucks more efficient and less expensive to produce, and therefore
more profitable."
In a similar move, Ford said Thursday that it was postponing around
$12 billion in planned EV investments, including the construction of a
new battery plant. The company's electric unit, called Model e, lost
$1.3 billion for the quarter, a loss of about $36,000 per vehicle
delivered.
At the same time, the company warned that, once its tentative
agreement with the UAW is ratified, its vehicles will run $850 to $900
more expensive than before. And with EV profitability low, an
especially sobering fact considering how weak EV demand is currently,
Ford, according to Former CEO Mark Fields, needs to keep its internal
combustion engine (ICE) business alive and well in order to keep
funding electric losses.
The UAW, announcing a tentative agreement with Ford, said the new
contract will feature 25% wage increases over the life of the
contract, plus cost-of-living adjustments and other benefits.
Michael Swensen/Getty Images
"The auto industry, it's all about getting scale economies and pennies
count," Fields told CNBC.
"The ICE business really funds the EV business. You've got to keep
that golden goose keep producing for them."
Ford's attempt to make up the extra $900 per vehicle in cost due to
the new contract, Fields warned, could wind its way into product
decisions, including whether Ford chooses to move production outside
of the U.S.
Electrification, he said, is coming. But it's not right around the
bend.
The best way forward for automakers right now, he said, involves the
approach Ford and Toyota (TM)
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Free Report are taking: meet consumers where they are with
hybrid and plug-in hybrid vehicles.
Hybrids, Fields said, are the best way to transition the industry to
an all-electric future. With customers not feeling an urgent desire to
move to all-electric, and manufacturers not feeling the growth that
would excuse the enormous losses EV production is causing, mass EV
adoption might just take a bit longer than people like Elon
Musk would like.
This impression is in line with a similar sentiment shared this week
by Toyota
Chairman Akio Toyoda, who, citing softening EV demand and mounting
losses, said that people are "finally seeing reality" when it comes to
EVs.
"Over time, you're going to see the industry propulsion systems shift
to full battery electric," Fields said. "The issue is, what's the
timeframe for that? There's a lot of excitement around the early
adopters, now you're getting to the tough part of mass adoption."
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