Ford Motor Company announced that it lost $2.1 billion on its EV business in 2022, double its losses in 2021, and it lost $722 million on its EV business over the first three months of 2023, putting it on track for roughly $3 billion in yearly losses. In 2022, Ford made 61,575 electric vehicles, resulting in a loss of about $34,000 on every electric vehicle it sold last year. In the first quarter 2023, Ford sold 10,866 electric vehicles for a loss of $66,446 on every electric vehicle it sold. For perspective, Ford lost the equivalent of a brand-new Mercedes-Benz E-class sedan, which has an MSRP of $66,700 (E 450 4matic), on every electric vehicle it sold during the first quarter. (At the end of 2022, the average EV transaction price was about $65,000.) Further losses can be anticipated as the cost of producing electric vehicles is increasing as are the critical minerals they rely on. Last year, the cost of battery packs for electric vehicles went up by 7 percent.
According to Ford, much of its first-quarter EV loss was due to lower production because of shutdowns at its plants in Mexico and Dearborn. The company cited production issues with the Mustang Mach-E SUV and the F-150 Lightning pickup truck for the low level of production, which was 32 percent lower than the same time in 2022. Ford expects that the division will be on track to produce at a rate of 600,000 units per year by the end of 2023. Fortunately for Ford, the company is still making large profits (about $4 billion during the first quarter 2023) on its conventional vehicles. It uses those profits to subsidize its EV losses. That means buyers of conventional vehicles are paying higher costs to subsidize EV businesses.
According to J.D. Power’s report: “EV Divide Grows in U.S. as More New-Vehicle Shoppers Dig In Their Heels on Internal Combustion,” the EV share of sales was down in March. While EV market share has grown “from 2.6 percent of all new-vehicle sales in February 2020 to 8.5 percent in February 2023, sales hit a speed bump in March, with monthly market share falling to 7.3 percent.” “Many new vehicle shoppers are becoming more adamant about their decision to not consider an EV for their next purchase.” The top reasons consumers provide for sticking with internal combustion engine vehicles are lack of public charging infrastructure and price—“the top two concerns for the past 10 months, along with related issues involving range anxiety, time required to charge and power outage and grid concerns.”
Price remains the biggest obstacle as the average EV buyer has an annual income of about $150,000, which is twice the U.S. average. Further, for consumers to get the full tax credit issued in the Inflation Reduction Act requires that the EV batteries and their components must come from the United States, or countries with which the United States has a free-trade agreement. Some forecasters expect that the total cost of the green manufacturing subsidies offered by the Inflation Reduction Act will top $1 trillion, with subsidies for the electric vehicle battery packs alone topping $130 billion.
Auto Workers’ Jobs in Danger
GM announced cutting more than 5,000 salaried and contract jobs, and Ford announced cutting more than 3,000. Ford intends to cut 3,800 jobs in Europe over the next three years to adopt a “leaner” structure as it focuses on electric vehicle production. It plans to cut 2,300 jobs in production development and administration in Germany, 1,300 in the U.K. and 200 jobs elsewhere in Europe. It will retain roughly 3,400 engineering roles in Europe, focused on vehicle design and development, alongside the creation of linked services. Ford employs approximately 34,000 people in Europe. It expects production of its first European-built electric passenger vehicle to start later this year. Ford plans to offer an all-electric fleet by 2035. Ford CEO Jim Farley said “We have skills that don’t work anymore, and we have jobs that need to change.”
About 5,000 General Motors Co. salaried workers took buyouts to leave the company, putting the company on its way to reaching a $2 billion cost-cutting target. GM set a goal of cutting $2 billion from operating costs by the end of 2024, with 30 percent to 50 percent of the total being achieved this year. GM’s February job cuts of a few hundred executive level and salaried jobs and the 5,000 buyouts “have provided approximately $1 billion towards” the $2 billion target. GM will cut production to keep inventories in check, which it did earlier this year with a pickup truck assembly factory in Fort Wayne, Indiana, for two weeks.
Chrysler announced cuts to 3,500 workers. Chrysler’s parent company is Stellantis, which owns the Chrysler, Dodge, Fiat, Jeep, and Ram brands. Chrysler is offering incentive packages to get 3,500 workers to quit their jobs, offering a $50,000 bonus to employees with seniority and a lump-sum payment for those with at least a year’s experience who will agree to quit. In late February, Stellantis indefinitely halted operations at an assembly plant in Illinois, citing rising costs of electric vehicle production. The action impacted about 1,350 workers at the Belvidere, Illinois, plant that built the Jeep Cherokee SUV and resulted in indefinite layoffs. The automaker has warned it may not resume operations as it considers other options.
By some estimates, upwards of 80,000 auto workers and a similar number in the auto supply chain have already been laid off globally to support the EV transition. For example, Daimler and Audi reportedly have eliminated 20,000 jobs, while auto supplier Bosch will be laying off 1,000 workers to support vehicle electrification. This may only be a start to the layoffs as electric vehicles need 30 percent less labor to produce than internal combustion (ICE) vehicles. That coupled with more automation that will be used for their manufacturing could result in many assembly line jobs disappearing.
According to the Biden administration, moving to electric vehicles will be the source of new, high-paying, jobs. President Biden says his EV policies will result in “one million new jobs in the American automobile industry.” However, he fails to mention how many of the current workers will be losing their jobs. For example, Michigan Governor Gretchen Whitmer claimed that since she took office in 2019, 25,000 new auto jobs were added to the state through her leadership in “the future of mobility and electrification.” However, a more accurate number is a net loss of 1,600 jobs as internal-combustion-engine (ICE) jobs were cut, and EV jobs moved elsewhere.
American automakers are announcing jobs cuts in the thousands, while globally as many as 80,000 auto workers may have lost their jobs. The tightening is necessary as electric vehicles require fewer workers to produce than conventional vehicles and as automakers are losing money on the electric vehicles they currently sell. Further, while auto companies have lofty goals for electric vehicle production, American buyers are still skeptical as price and lack of charging stations loom as major problems. Americans like convenience and so far electric vehicles cannot compare to ICE vehicles for range, hauling capacity, refueling times and locations, and price, to name a few.