EVERYONE IS GOING ELECTRIC!
Ford Motor Co., one of the world’s leading automobile makers, has been pouring boatloads of cash into its electric vehicle (EV) unit -- Ford Model e -- for some time now. According to recent reports, the new EV unit has been losing billions of dollars, leading some to question the company’s strategy. But should we be quick to characterize the venture as a failure? The answer may be more complex than it seems.
For starters, it’s important to understand the structure of Model e – which is essentially a startup within a bigger, established company. Like any new venture, it takes time to cultivate and refine a business model that works. That's especially true in the world of electric vehicles, an industry that is highly competitive and constantly evolving.
Furthermore, the Model e has taken on some of the most ambitious projects in the EV space -- such as the F-150 pickup truck, an electric Transit commercial van, and the Mustang Mach E SUV. As Ford's CFO, John Lawler, explained, “After 120 years, we've essentially re-founded Ford. We're embracing technology and competitive disruption in our industry, fundamentally changing how we're thinking, how we're making decisions, and how we're running the company.”
The Model e is expected to be in the red by about $3 billion this year. However, it is important to view those losses in the context of Ford’s overall strategy. The company is betting big on EV – given that it sees a future wherein EVs are the norm, rather than the exception.
Other EV startups have experienced similar scaling difficulties. For example, Lucid Motors ($473 million loss in the fourth quarter) and Rivian (net loss of $3.1 billion in the first quarter) have struggled to achieve mass production.
Ultimately, the success of Model e rests on several factors, including the evolution of technology, the ability to gain market share, scale production, and the willingness of consumers to adapt to the developments in the industry.
While Model e losses concern many analysts and investors, Ford continues to press forward. And as the automobile industry continues its shift from fossil fuels, it seems clear that Ford is committed to playing a significant role in that transition.
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