EVs create profit potholes for major US automakers GM, Ford

The electric vehicle push at Ford and General Motors hit a speed bump that’s cutting into the automakers’ profits and causing them to reevaluate their electric vehicle (EV) plans amid a price war and supply chain challenges.

Ford noted in its earnings report released last week that its EV unit posted a quarterly loss before interest and taxes (EBIT) of $1.33 billion – an acceleration after a loss of $1.08 billion in the prior quarter. It added that it’s cutting production of its Mustang Mach-E while scaling back about $12 billion in planned investments in the EV segment, including delaying its second battery plant in Kentucky.

«It's been a challenging situation, for sure,» Ford CEO Jim Farley said during the company's third-quarter earnings call after posting greater losses than expected on EVs. «Matter of fact, our business is never short of challenges, especially right now with the evolution of the EV market and new global competitors from China, as well as the technology disruptions.»

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Farley added that a «great product is not enough in the EV business anymore» and emphasized that Ford has to be «totally competitive on cost» because «affordability is an issue» for consumers considering EV purchases.

Analysts from Wells Fargo wrote of Ford’s EV woes, «We believe that the rise in battery raw material costs has negatively impacted the outlook for BEV (battery electric vehicles) profitability, and consequently, Ford’s profitability.»

Ticker Security Last Change Change %F FORD MOTOR CO. 10.14 +0.23 +2.32%GM GENERAL MOTORS CO. 28.80 +0.80 +2.86%

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General Motors saw its quarterly profit reduced by about $1.5 billion because of higher costs and the impact of selling more EVs – though it doesn’t break out losses from its EV unit in the same way Ford does.

GM CFO Paul Jacobson said that it would abandon an interim goal of building 400,000 EVs from 2022 through mid-2024, instead focusing on a goal of «getting to 1 million EVs of production by the end of 2025 alongside hitting our margin targets.»

«We are also moderating the acceleration of