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Electric vehicles can\u2019t keep being money losers<\/a> in perpetuity but for the time being, that\u2019s exactly what they are.\u00a0<\/p>\n In a wide-ranging interview, Ford CEO Jim Farley touched on the difficulties<\/a> facing the electric vehicle market. Originally touted as the next big thing in the auto industry, new models have struggled to gain market share beyond early adopters<\/a>. As a result, sales have languished. That\u2019s left automakers, like Ford, to figure out how to invest in an emerging technology that will prove critical to the future, despite it currently being unprofitable<\/a>. It is \u201cundeniable\u201d that Ford\u2019s electric vehicles will have to eventually become a money making enterprise, the CEO said.\u00a0<\/p>\n \u201cWe\u2019re not gonna invest in the future of EVs unless we\u2019re convinced we\u2019ll be profitable,\u201d Farley declared in an interview with Yahoo News<\/a>.\u00a0<\/p>\n So far, they aren\u2019t. But Farley is betting on a reversal. In the first quarter, Ford\u2019s electric vehicle segment lost $1.3 billion<\/a>. Farley said those losses would become profits in \u201ca couple years\u201d when Ford churns out its second generation of electric vehicles.\u00a0<\/p>\n In \u201cthe first generation, we have a lot of opportunity to improve our losses,\u201d Farley said. \u201cBut until we get to the second generation, which we start to roll out in the next couple of years, that\u2019s when things turn around.\u201d<\/p>\n A spokesperson for Ford said the company hadn\u2019t released specific timing on when it expected its electric vehicle business to be profitable. They added that the new EVs will only be released once that\u2019s the case. \u201cWe\u2019ve also explained that we\u2019ll introduce next-generation EVs\u2014they\u2019re well along in development, new from the ground up\u2014when we\u2019re confident they\u2019ll be profitable within the first year,\u201d the Ford spokesperson said.\u00a0<\/p>\n Ford and other EV makers face a tall task if they\u2019re to live up to Farley\u2019s words. Recent months have shown just how much the transition to electric vehicles has stalled. Consumer demand for fully electric vehicles has waned<\/a> considerably. In turn, Ford opted to make more hybrid vehicles instead of fully electric ones and pushed back delivery of the newest lineup of electric vehicles. More than anything else, average car buyers\u2014those not already predisposed to purchasing an electric car\u2014have been put off by high prices<\/a>. That\u2019s to say nothing of the already existing concerns<\/a> about the hassle<\/a> associated with finding a charger when a car\u2019s battery runs low.\u00a0<\/p>\n Ford is currently the second highest-selling EV manufacturer in the country, selling about 20,000 cars in the first quarter. The remaining hurdle for Ford and its peers is to find a way to reduce costs for their models, which still tend to be priced higher than standard, internal combustion engine cars. It could take years for electric vehicles to reach the same level of costs as gas-powered vehicles. It\u2019s unlikely electric vehicles will be as cheap<\/a> to manufacture as combustion engine cars before 2030, Farley said<\/a> last month.\u00a0<\/p>\n The majority of lower-priced EVs come from Chinese manufacturers such as BYD<\/a>. China is the world leader in electric vehicles because it has an advantage in the manufacturing of car batteries, which have significantly higher costs compared to internal combustion engines. Farley estimates the costs of a combustion engine\u2019s drivetrain are 10% of those for an electric vehicle. Until U.S. companies like Ford can produce car batteries and other components more affordably, they won\u2019t be able to compete.\u00a0<\/p>\n \u201cReally it\u2019s the batteries and the one time investment for building the battery plants and the manufacturing facility and engineering these very different kinds of vehicles,\u201d Farley said.\u00a0<\/p>\n The actual engineering of the vehicle, the parts that are required to build an EV, are totally different than an internal combustion engine vehicle.\u201d\u00a0<\/p>\n Ford is currently building a new electric vehicle plant in Michigan. Construction on the facility resumed after it was paused during the autoworkers strike last summer. Although, when construction resumed in November, Ford scaled back<\/a> the plant given the lower demand for electric vehicles from customers. The downsizing will reduce the number of expected jobs at the plant from 2,500 to 1,700 and the projected battery output will be 230,000 a year, down from 400,000.\u00a0<\/p>\n Earlier this year Ford cut back production of EVs at its existing plants as well. Hit especially hard by lagging sales was the F150 Lighting, the electric version of its popular pickup truck. In December, Ford announced it was cutting production<\/a> of the F150 Lightning in half. By March it had laid off two two-thirds<\/a> of the employees at the Dearborn, Mich. facility where the electric truck was assembled.\u00a0<\/p>\n The cuts in production come at the same time as the Biden administration implemented a series of tariffs on Chinese electric vehicles meant to protect domestic manufacturers. Farley welcomed the tariffs in the short-term, but said Ford shouldn\u2019t rely on them too much moving forward.\u00a0<\/p>\n \u201cTariffs are an important part of leveling the field for a time,\u201d Farley said. \u201cBut ultimately Ford has to be fully competitive on cost and quality with whoever we compete with, including BYD or [other] Chinese players.\u201d<\/p>\n Critics of the tariffs<\/a> also agreed with Farley that they would be effective immediately but shouldn\u2019t be a long-term solution<\/a>. The principal concern is that the U.S. electric vehicle industry should learn to stand on its own two feet. That way, the companies making elective vehicles will be able to support both the U.S. economy and its efforts to fight climate change through the energy transition<\/a>.<\/p>\n<\/div>\n\n