What a way to start the week. Ford is claiming it has to lose $100,000 on every EV it builds and the Biden administration is hinting it’s going to raise tariffs on Chinese cars to 100%. Get ready for a wild ride for this Monday’s installment of The Morning Dump as I dive into all the big EV-related news.
Right off the bat, we’ve got to talk about Ford’s claim, which is both accurate and, also, a little misleading. And then we should talk about Toyota, which is investing a ton of money in a new facility in Greensboro, NC to build electric cars.
No entity has invested more into developing cheap electric cars than the country of China, but China has a big problem in that building great cars is not the same as building trust, which is a lesson the country will learn again this week when new trade barriers are put up to keep Chinese cars out of the United States. You know what would build trust? Raising the currency.
And, finally, both Honda and Subaru seem to be doing just fine thanks to a lower-than-usual currency.
What Losing $100,000 Per Electric Car Actually Means
About a decade ago, Ford spent $3 billion to switch the 13th-generation Ford F-series frame from primarily steel to an aluminum-intensive design. This was a massive technological and manufacturing undertaking that, in retrospect, was absolutely the right call.
It also means that Ford lost at least $3 billion on the first new F-150 it made, which is not something I remember Ford complaining about at the time. Instead, I remember Ford PR folks defending the technology and pointing out they were right and that the future would support this decision.
When it comes to EVs, the attitude seems to be quite the opposite.
Let’s get to what people are saying, via Bloomberg, in this article about Ford cutting its battery orders:
A spokesman for Ford said the company typically doesn’t comment on relationships or terms with suppliers. CATL said its “cooperation with Ford is moving forward as normal” without elaborating. SK On and LG said their contracts with Ford remain in effect but didn’t immediately address the prospect of order changes.
As EV prices have plunged and demand has slackened, Ford’s losses per EV exceeded $100,000 in the first quarter, more than double the deficit from last year, one of the people said.
Bloomberg Intelligence estimates the losses Ford expects to sustain in its EV unit this year will come close to wiping out the profits it earns from its Ford Blue division, which makes traditional internal combustion engine vehicles like the Bronco SUV and gas-electric hybrids such as the Maverick truck.
Electric cars are expensive. This makes switching the F-150 from steel to aluminum look like me switching from the 1-minute oatmeal to the 7-minute oatmeal (which, hey, not not a big deal).
But the investment has to be made and it’s rare to hear car companies talk about loss-per-vehicle in the early stages of a technology. David Fickling, a Bloomberg Opinion columnist, made this point over the weekend:
The figure is bogus, dependent on a quirk of US accounting rules that mean the one-time expense of rethinking the automotive power train for the first time in a century is being treated as an ongoing annual expense, and then divided by 2024’s lackluster EV sales.
[…]
The enthusiasm with which some auto executives bandy about such spurious figures shouldn’t be taken as a sign of how costly EVs are, but of the deep cultural aversion to change within many US car companies.
I agree it’s important to check automakers on these big loss figures, especially given that battery costs have been going down at a record pace. But I don’t think it’s an aversion to change. Most automakers would be happy to build more EVs and are more than ready for the change. Automakers in Europe and here in America have been quick to jump into autonomous driving and EVs and anything else that looks like the future.
What seems to have happened is that automakers, as public companies with a responsibility to shareholders, got caught out thinking EV adoption was going to be quicker than it was. Tesla’s skyrocketing valuation didn’t help the decision-making.
Last week I explained that Tesla price cuts and the Inflation Reduction Act may have temporarily increased EV adoption, but it’s not going to be a straight line up-and-to-the-right as the lowest-hanging EV adopters have already been plucked. It’s going to be a slog to get the rest of them, even as total EV sales will probably continue to increase.
Going back to the F-150 example, Ford sold more than 750,000 F-Series trucks in 2014 and more than 900,000 yearly by 2018. All electric cars in the United States last year totaled about 1.2 million vehicles spread across Tesla and about 25 other brands, most with multiple EV models.
Ford recoups its F-150 investments quite rapidly, but even with big incentives from the federal government, EVs are going to take longer for most. Ford sold a whopping 24,165 electric F-150 Lightning trucks last year, making it one of the most popular EVs sold in America that isn’t the Tesla Model Y or Model 3.
Rather than being afraid of change, I think automakers were too excited about how easy it would be and lost focus on the potential of hybrids. Then high interest rates arrived to make everything more expensive, coupled with a Tesla-led price war that’s forced many automakers to dramatically lower the price of their cars. As an example, Ford recently cut the F-150 lightning price by as much as $9,000 to keep them moving, which isn’t something you want to do before reaching profitability.
This generation of $40k+ two-row crossovers and modified EV trucks just isn’t what the market needs. GM is far enough ahead and has had enough experience in building electric cars that it thinks its EVs (depending on how you look at the accounting) can be profitable this year, but this was a long and difficult process for GM.
This is why Ford has, probably wisely, slowed down on its interim generation EVs and thrown all its efforts into a low-cost skunkworks car that can sell for $25,000 and be profitable in a year.
Carmakers have to make generational investments in electric cars unlike anything that any auto exec still alive has had to deal with, so when you hear an exec say they’re losing $100,000 a car you can believe them, but it’s not quite the whole story.
Toyota Is Putting $13.9 Billion Into North Carolina
I was quite shocked when I first arrived in Greensboro, North Carolina a couple of years ago for a project. My friend went to school there in the early aughts and didn’t have much to say about the place, but this looked like a modern small city.
[Editor’s Note: I grew up in Greensboro, which we used to call Greensboring, but honestly, it’s not that boring anymore. I take my kid there for the retro video game store and seeing penguins at the science center and stuff. Seeing it in these kinds of contexts still feels strange. – JT]
It didn’t hurt that I was the guest of my client, a man who helped rebuild much of the city and therefore put me in a hotel room overlooking the city’s new minor league baseball stadium and the pool. The place had energy.
A little way down the road is Liberty, North Carolina, the little town that’s going to be home to Toyota’s giant battery plant that’ll be building batteries for hybrids, electric cars, and PHEVs.
Automotive News went down there and, unlike Ford’s slowdown, the company is going forward with its plans:
It’s a massive undertaking, Toyota’s largest investment in one location, with multiple buildings in various stages of completion — most of which will eventually boast a half-million or a million square feet under its roof.
Seven buildings in all are dedicated to making batteries, with two production lines planned for each: 10 lines will build battery packs for future EVs and plug-in hybrids; four will build battery packs for hybrids.
Toyota was first critiqued and now, in some circles, lauded for its slow move toward EVs, but the company is working diligently on solid-state batteries and knows that it’ll eventually need that capacity. Imagine a U.S.-built RAV4 PHEV that could qualify for a $7,500 tax credit!
Given how quickly Toyota has dropped the price of its bZ4X EV and is still barely selling them, I can’t imagine how much money Toyota is losing per-EV in the United States.
Biden Likely To Increase Tariffs On Chinese Cars To 100%
There’s been a lot of talk lately about how good Chinese cars have gotten (as David wrote in his enormous feature), including this also-big feature from InsideEVs and our old pal Kevin, and I’m here to tell you it doesn’t immediately matter. China needs exports and both Europe and the United States need their respective industrial bases (and voter bases). Cheaper EVs aren’t a big enough draw to get these countries to blow up their economies.
Chinese cars were heavily subsidized, and that’s not great for fairness in the world of trade, but fairness isn’t real. I took my mom to see Wicked this weekend for Mother’s Day and this line stuck with me:
The truth is not a thing of fact or reason, the truth is just what ev’ryone agrees on.
That’s just a folksier recasting of Napolean’s “History is a lie agreed upon,” but it’s true.
What’s less fair about Chinese cars isn’t that the country has massively oversubsidized its EV supply chain and battery, nor that it could cajole its citizens into embracing EVs and its companies into building them. What’s unfair is that China isn’t trying to make its citizens that much richer, it is trying to make its citizens compliant. It does this, at least partially, by keeping its currency, the yuen, artificially low so the average Chinese citizen makes more than their parents did, but only so much more.
Here’s a good way to think about it. BYD is supposedly the biggest threat to Tesla and yet, over the last five years, BYD’s stock has increased 376%. Tesla has increased by 1,130%. Hell, you could have made more money by buying the energy drink company Celsius, which is up almost 6,000% over the same period.
The United States and the West didn’t initially have as much of an issue with this when it meant that Chinese companies sent us a lot of cheap goods, but now that China has invested that money into going from being a producer of inexpensive stuff to expensive stuff (and technological stuff that could be used against us) we all of a sudden care.
All of this is to say that the Biden Administration is probably going to make it even more difficult to import Chinese EVs according to this Detroit Free Press report:
Tariffs on Chinese EVs will roughly quadruple under the new Biden plan, the Wall Street Journal reported, citing people familiar with the matter. Senate Banking Committee Chairman Sherrod Brown wants the Biden administration to ban Chinese EVs outright, over concerns they pose risks to Americans’ personaldata.
That’s up from 25% from the Trump administration.
It’s hard to blame Biden, Trump, or any other leader for doing this. Even if you can get past subsidies, labor issues, and the sourcing of materials, modern cars are extremely software-dependent and so there are real potential national security concerns. No one is worried about their BMW spying on them or Germany suddenly supplying arms to Russia, but the same can’t be said about China.
Honda Made 70% More In Profits, Subaru Up 75%
Toyota announced it made more money than any public Japanese company ever and, while Honda and Subaru aren’t quite there yet, both companies still made massive profits thanks to a weaker-than-usual Japanese yen.
Currency Rules Everything About Me, CREAM, get the cheddar, et cetera.
Honda, like Toyota, doesn’t see itself making as much money this year as it has to make investments. Per the AP:
The maker of the Accord sedan and CR Electric Proto motorcycles was less optimistic about this fiscal year, forecasting that its profit will decline nearly 10% to 1 trillion yen ($6.4 billion), as research and development spending was expected to increase to nearly 1.2 trillion yen ($7.7 billion) from 964 billion yen.
The maker of the Accord sedan and CR Electric Proto motorcycles was less optimistic about this fiscal year, forecasting that its profit will decline nearly 10% to 1 trillion yen ($6.4 billion), as research and development spending was expected to increase to nearly 1.2 trillion yen ($7.7 billion) from 964 billion yen.
Subaru, on the other hand, has the benefit of being connected to Toyota. Via Automotive News:
To achieve the stratospheric surge, Subaru plans to roll out four full-electric crossovers by the end of 2026, including the existing Solterra that is a cross-badged stablemate of the Toyota bZ4X electric crossover. After that, it plans to add four more EVs by the end of 2028.
Osaki said all four EVs in in the first wave, including the Solterra, will be jointly developed and produced with Toyota, which has a 20 percent stake in the smaller Japanese player.
I honestly forgot the Solterra existed.
What I’m Listening To While Writing TMD
I think we’ll be hearing a lot from spin doctors the next few months, so let’s listen to the Spin Doctors for a bit. Unlike me, she can’t be wrong. I’m wrong all the time. Also, I forgot how hard the first line of this song goes for what sounds like adult contemporary music now.
The Big Question
Do you instinctively blanche when you hear that $100,000 number or does it sound right to you?
I don’t agree with the contention made by the Bloomberg columnist that this reporting (loss/vehicle) is a reflection of the deep cultural aversion to change of the big ice manufacturers nor that it is a bogus metric.
I sat in on Rivian’s quarterly earnings call last week, and a lot of time was spent talking about this exact same metric. Rivian, who only makes electric vehicles, clearly has no deep cultural aversion to change (from ice). Instead, they use this metric as a positive in that they are slowly, but consistently whittling this number down per vehicle sold. They expect to reduce it to zero by the end of 2024 fiscal year. The devil is in the details though, and they will be turning their first gross profit per vehicle by that time before EBITDA (earnings before interest, taxes, depreciation, and amortization). Net profit is ultimately what matters, particularly in a startup with stratospheric capital expenses and cash-burn rates such as Rivian has. However, it is progress in the right direction. The metric can be a very useful one when combined with sales numbers/projections in that, at the end of the day, how much a manufacturer is making/losing on each unit they sell is a simplified, quick and dirty assessment of where they are in their growth curve towards overall profitability on a product line.
The metric is absolutely valid and useful, but the way it’s usually used in reporting is also misleading and bad. It’s generally portrayed and interpreted as the sale price minus the per-unit production costs, which would mean the whole vehicle category is unviable as a business. Which gets lots of clicks because it’s something some people love to rage about.
The headline is bad, misleading, and contradicts the content of the article. I mean, you quoted someone as saying “The figure is bogus”. If you need the big number to encourage clicks, how about “Why Ford Is Not Losing $100000 On Every Electric Car It Sells”?
This is the same kind of garbage people were saying about the Volt when it first came out. It wasn’t right then and isn’t now. I’m disappointed this made it through your editorial review.
On a more hair-splitting note:
Was it? F-150 insurance rates went up significantly once it became clear how much more repairs were going to cost, and no one else has followed them down the all-aluminum path (at least in trucks). The other manufacturers still use aluminum for some body panels where it makes the most sense, but not all.
I’m not going to say it was definitely the wrong call either, but I don’t think there’s anything “absolute” about it. “Debatably the right call” would be more accurate IMHO.
But like I said, splitting hairs here. This pales in comparison to the inaccuracy of the headline.
I think the article explains why Ford is losing $100K on every electric vehicle they sell. It’s because they’re explaining the accounting wrong and also not selling enough. It’s pretty clear.
If your argument is that the headline is too sensational, then maybe you’re right, but websites live and die by clicks. The headline, “Ford is Slowly Recouping Their Investment in EVs”, doesn’t encourage clicks, it encourages a shrug. Shrugs don’t pay salaries, and unfortunately memberships aren’t enough. The content here, by and large, is much better than elsewhere and I want to see them do better than scrape by.
So…not actually losing $100k. Which is my point. The number only exists in the fantasy world of corporate accounting.
And if they need the sensational headline, I already provided one that is factually accurate and still includes the big, scary number.
I think in this case the misleading headline also means it’s more likely to be clicked on by the people who most need to read the body of the article.
I’m not so sure. Those people are likely to read the title of the article and immediately take to Facebook to complain about how the government is forcing Ford to lose $100000 per car. The types of people this headline is targeting are not big on fact-checking.
I’m by no means a finance person, but I’ve studied the auto industry since I was 12, so I can claim enough familiarity with how these companies account for sales, forecasting, and cost amortizing, that the -$100k/unit cost was what I expected it to be.
I used to think hybrids were lame and just a stopgap on the way to full electric cars. But now I’m not so sure. At least for the foreseeable future.
You don’t see Toyota with .99% APR on a Hybrid Rav4.
The F-150’s frame isn’t aluminum; the body is.
It’s my understanding that Ford’s research laboratory began experimenting with bonded-and-riveted aluminum construction (like an aircraft). as early as 1993 or 1994 (note that this is the same time the aluminum-space-frame Audi A8 debuted, which is a different kind of construction). Anyway, Ford wanted a relatively low-volume way to hone bonded-and-riveted aluminum construction, so it decided to use its Jaguar subsidiary for that. In 1996, the company began developing the “X350” XJ, essentially by taking the DEW98 platform co-developed by Jaguar and Ford and converting it to aluminum. The X350 XJ debuted in 2004 and lasted through 2009. Various Jaguars have used or currently use an evolution of that platform, including the F-TYPE.
Meanwhile, after Ford saw success with the XJ, it tooled up for the 2015 F-150 to have an aluminum body.
I believe Mullaly was a big factor in the F-150 going the aluminum since he already had that experience from Boeing to ease the pain when going to a massive scale.
Regarding Ford and their BEV ‘losses’ and the big question… what that really means is they haven’t amortized their BEV development costs compared to other companies like Tesla.
The solution to that is they need to make the most of their investment and crank out the product.
But one thing that pisses me off about legacy car makers… they make such a big deal about their “BEV loses” which will clearly go away as the investment gets amortized (unless they cancel the products related to the investment before that happens), but they stay quiet about their ICE vehicles and ICE tech that they lost huge on.
For example… the GM Blackwing V8 that they spent a shitton of money developing and then barely used. I bet GM’s losses might have been as high as $100K for every one of the few vehicles that had that engine.
Or let’s talk about how much money the PowerShit transmission cost Ford… not just in terms of development costs, but also in terms of warranty costs and pissed off vehicle owners that swore off Ford products because of that half-baked POS of a transmission.
Never hear anything about THOSE losses, eh?
In spite of what they say, plenty of people at legacy auto OEMs STILL don’t want to really do the BEV thing and many at these companies are STILL wishing BEVs would somehow “go away”.
Thank you for calling out and explaining the strategy of defining cost
Guess this means I’m definitely not getting the Volvo EX30 since they were using the exports of the EX90 to offset the current tariffs.
Yeah I am interested to see if that loophole still works. If I remember right, a lot of Buicks are built there as well. I know a couple were in the past but that may not be the case anymore. Not EVs though. But that will certainly kill any market for what appears to be an interesting car.
The Chinese subsidies aren’t just money. The CCP subsidizes its strategic industries by providing slave labor. Slave labor in Xinjiang alone is estimated in the hundreds of thousands and has been credibly linked to cotton (face masks), polysilicon (solar panels), coal, lithium, and aluminum production (EVs).
It is not a coincidence that these are the products receiving tariffs. Even beyond the moral revulsion, no amount of financial subsidy the US can provide will level a playing field tilted by slavery. The only thing you can do is place fees/penalties/bans on products suspected of using slave labor.
The main unfair advantage China has is the joint ventures to steal IP/technology/trade secrets.
Chinese companies can just make their cars in Mexico, like American companies do. Of course, Detroit gets pissy that other companies want to use the exact same loophole they use.
Mexico takes care of the Xinjiang problem. Also, even with the most childish/jealous tariffs they can imaging, China can still undercut ANYBODY! They are NOT afraid to stoop to Detroit’s level and beat them there too.
Tariffs won’t make American cars competitive. Other countries will just retaliate with their own tariffs.
Detroit has nobody to blame but themselves. They keep making shitty cars and even worse decisions.
In my humble opinion, if you have literal slaves working literal cotton fields with literal guns to their heads, you have no farther to stoop. I’m with John Brown on this one.
This isn’t about America versus the world, it’s about the world versus China.
> no amount of financial subsidy the US can provide will level a playing field tilted by slavery
Some states are reducing the legal age when children can start working, eliminating mandated breaks and protection against heat, and I wouldn’t be surprised if some politicians and captains of industry did in fact want slavery to come back.
I guess that depends on the specific laws they are changing.
Are they reducing the legal age to 16? That is just smart. How about 14 with specific restrictions (did we all forget paperboys were much younger?) or are they making it 10 at a Hyundai factory which would be horrible, (how did they not get in serious trouble for that???)
The federal government could mandate dumb infotainment systems for Chinese cars and have the same effect. Replaceable head units with a hole for an audio jack.
They’re going with Tariffs to protect the Unions and the Automakers, and we all saw how that went with the Chicken Tax.
I can’t wait to learn how much worse our cars will become due to pure protectionism.
I’m curious as to your thoughts on how US manufacturers should be competing with Chinese companies that are very heavily supported by a strong centralized government.
by making better cars
Almost nobody wants to pay more for better quality. Look at about any industry from tools to furniture—the quality, mostly affordable mid-range has been gutted, killed by cheap junk purely because it’s substantially cheaper or forced to (try) to move up range out of the reach of most people and, often, even they decrease their quality to save on cost. If it was a matter of making “better cars”, nothing from Germany or Korea would survive, either. Speaking of which, Mercedes-Benz used to sell quality-feeling cars that were built to last with regular maintenance, now they trade on a name and are meant to be swapped out when the lease is up before the repair costs exceed the value. People keep buying Hyundais and KIAs in spite of seeming weekly major recalls and high insurance costs for what’s just another bland car largely because they’re slightly cheaper/will lend to anyone.
There’s also the moral issue of the use of slave labor that matters even to a misanthropic guardian of the underworld. So what, then don’t buy it, stupid 3-headed dog, how the hell can even drive?! My problem is those relatively few of us who GAF will be left without options and, once you’ve handed the market to this hostile nation, they’ll raise their prices (and maybe strategically restrict export depending on what’s going on geopolitically) leaving you with only higher priced trash to buy and desolate manufacturing areas full of angry people who vote for pants-shitting authoritarians out of spite and we have too many of them already for what manufacturing we’ve let move overseas, primarily to China. Now, for some industries, such an event could theoretically mark the point of a domestic comeback as the higher prices and fed up consumers may leave an opening for them, but not automobiles with their start up costs, massive logistics train, and inevitable early quality issues. That’s not even factoring the level of devastation we’re talking about as few industries have the same economic breadth as the automotive sector.
Stellants/FCA shit couldn’t even sell during the pandemic’s peak when NOBODY else had any inventory.
Toyota and Honda do just fine. And they make lots of cars in the US.
GM sells Chinese cars here, and all 3 Detroit companies use Mexico for cheap labor then get pissed when other car companies want to do it, too.
Chinese companies can make their cars in Mexico
Protectionism is the reason we’re stuck mostly with overpriced oversized big trucks that have gotten so big they should really require a CDL.
Almost everybody has killed off their cheaper cars. Mirage prices have almost doubled over the past few years as the competition disappears.
Europe remains a competitive market.
They do, but they’re not domestic companies. GM and Ford also sell a lot of cars in the US. Protectionism did help trucks, just as the 25 year rule helped the Eurotrash companies sell their junk here at inflated prices, but there’s a large difference between a segment that would have very likely been quite safe (except for smaller trucks that have long died off anyway, not that it was predictable at the time) and nearly the entire market. OK, the real low end has been abandoned and, while some was just unprofitable at the fairly low volumes (sub compacts) paying union wages, the compact market was likely still fair game. Problem is, what’s going to stop the Chinese with their slaves and subsidies from dumping midsize vehicles into that segment? Hey, that sounds great! I remember when every town had a small hardware store with all kinds of little doodads and so on and friendly service (usually). Then Home Depot came in with all the same stuff and ten times more for the same price or less in a giant, generic box and they hired knowledgeable people you could ask for help on a project. Then all the little hardware stores died, usually cornerstones of a small main street, leaving a large dead space that soon spread. What did HD do then? Got rid of all the useful employees, stopped carrying all the little interesting things I actually needed for odd projects, downgraded the tools, and jacked up the prices. At least the lumber yards survived, though their species variety has been reduced.
NONE OF THAT ADDRESSES THE MORAL ISSUE OF USING SLAVE LABOR. One can argue about the evils of modern crony capitalism all day and I’ll probably agree with most of it, but that’s still a far cry from the use of actual slaves. I hate that I have to buy petroleum products that are globally blended as I know some of it comes from the Middle East and the Prince Prosperos who live their disgusting, indulgent lifestyles on the backs of slave labor. It truly astounds me that I’m the one who has to keep bringing that up as I’m someone who would be considered far more morally flexible than most when it comes to the lives of humans, but even I can’t tolerate slavery, especially just to save my cheap ass a few bucks in the short term and for junk, at that!
“Almost nobody wants to pay more for better quality. Look at about any industry from tools to furniture—the quality, mostly affordable mid-range has been gutted, killed by cheap junk purely because it’s substantially cheaper or forced to (try) to move up range out of the reach of most people and, often, even they decrease their quality to save on cost”
Is it though or is it planned obsolescence maybe even managerial incompetence/indifference? Mercedes has written many times about terrible build quality of modern RVs and motor homes and the insane amounts of money people spend on them. Pretty sure the problem there isn’t the customer’s pocketbook.
How much more would it costs a furniture or cabinetry company to use waterproof, outdoor rated grade particle board or plywood that can last forever instead of shitty hygroscopic indoor grade junk that falls apart at a hint of moisture? I’m pretty sure the answer is much less than the slight extra a customer would be willing to pay. It wasn’t that long ago flooring companies were marketing engineered wood planks incompatible with water for kitchens and bathrooms. Terrible idea! Sure the fine print said they needed compatible cleaning products but that doesn’t help against spills, leaks, pets or kids.
Or how about just building the things right the first time? How much more does it cost a company to tighten fasteners to their specified torque? Recalls and lawsuits are expensive.
People do not have the understanding to be able to determine what the best product is, at least not when it comes to things that don’t interest them.
I still have the stapler my grandfather liberated from the municipal offices where he worked. Made in Sweden over fifty years ago and still staples great. But the company that made it went bankrupt eons ago, because no one can make money selling quality goods any more. It’s a real problem with late stage capitalism, and unless we figure out a market system which automatically promotes quality and reduction in raw material use, we are all done for in a couple of generations. Band-aids in the form of regulations and things are not going to solve it.
Being more adaptable and not being bogged down by bureaucracy. That itself has nothing to do with the CCP. Most automakers have obscene amounts of bureaucracy that sucks tons of cash in doing so drives up the costs of all their automobiles, and the only reason they stay competitive is protectionism.
I think it’s worth noting that there have been a few studies published recently that show plug-in hybrids are frequently driven by people who never actually plug them in. From a fuel savings and emissions point of view, this makes PHEVs worse than ICE vehicles, since you have to burn more fuel to carry around the unused EV components. This is a big deal for companies like Toyota that currently benefit from government regulations and subsidies that put PHEVs on par with full EVs in terms of emissions reductions. Those regulations and subsidies are going to be changing, sooner rather than later, which means the “happy times” at Toyota might well be short lived.
It would make PHEVs worse than Full Hybrids, but they’re still better than pure ICEs in terms of fuel economy.
I should have clarified that a PHEV would be less efficient than an equivalent ICE vehicle under conditions in which the electric motor and battery are not being used very much, such as extended high speed driving. Overall, under normal driving conditions, the PHEV would be more efficient.
Germany may not suddenly supply arms to Russia, but they did buy an awful lot of natural gas. I don’t think that money went to fixing up the Nevsky Prospekt. And we trust BMW, industry leader in ‘subscriptions to things we already own’, not to spy on us?!
Honestly I think Apple made a huge blunder in trying to build an Apple Car. I know that they prefer their software to run on their hardware, but this is a pipe dream for cars. Suppose they had built an Apple Car Computer instead, which could be loaded with firmware for different platforms and built into the cabin. Apple would vouch for the software quality, the chips, the screen, and so forth.
Car makers would be freed from doing something they hate and are terrible at, buyers could have confidence that their car wasn’t programmed by three kids in a trench coat, and Apple could turn a tidy profit.
I’m waiting for my phone call, Apple…
I find Apple use inscrutable. I wouldn’t buy such a thing. Android all the way for me.
Apple have the resources to develop all the required software and hardware and access to enough manufacturers to build them in scale. They’re also an American company who are (theoretically) more accountable to oversight. And, as a lifelong Android user, I do have to say that iUsers seem to have lots of iStuff from ages ago still ticking. Plus the screens are really nice.
Maybe I’m just sore because for the first time I own a car with an infotainment screen thingy and I’m just completely baffled by how something with like 4 functions can be so slow and unresponsive. It’s just unconscionable! Nobody would tolerate that kind of shoddy performance in a phone, but it’s somehow become the norm in cars.
I don’t know a ton about infotainment systems but my guess is that they are built to use as many off-the-shelf components as possible because automakers generally don’t have deep domain expertise in that kind of electronics and software development. One of the consequences of that engineering approach is that you can quickly introduce a lot of hardware components which all have to buffer their input before piping it to the next component, which in turn waits to fill its own buffer, and so on. This by itself can introduce significant delay into the interface. I’m also guessing that the software interface is written in a high-level language so as to be as portable as possible across the brand’s vehicle lineup, and to allow the underlying computer components to be swapped out without incurring additional development costs. But the side-effect of running a user interface that way is that it introduces still more delay, since each interface instruction has to be interpreted into machine instructions before it can actually be executed.
To be fair to legacy automakers this is a totally sane risk management approach since you don’t want your fancy UI to be useless if your chip supplier goes out of business or something. But it also sucks to be mildly frustrated every time you change the radio or something and the screen just takes a hair of a second longer than it ought to.
This, but not just infotainment—every damn thing in cars today seems to lag and it’s truly unbelievable to me that people are fine with it. When I used to hit a physical damn button or switch (like, an actual mechanical one, not something that has to ask mommy BCU for permission first), the result was as close to instantaneous response as I could ever notice. Now, every command seems like it has to go through a committee. People talk about how bad shit boxes of the old days were, but if any of those old shit boxes in the ’80s hesitated like too many new cars do, they’d have been brought back to the dealer—”I think the timing is off or the throttle is sticking shut or something. Seems to idle OK, but I don’t know—something’s wrong.” And stereos didn’t need to boot up. Or randomly reboot. Or want me to acknowledge a disclaimer stating that operating the infotainment while driving is dangerous when they’re the assholes who put everything on there! Every. Damn. Time. I. Start. The. Friggin’. Car.
This. Let’s write a manifesto or something, including bits about amber turn signals so that we can use Torch’s likeness.
I don’t think Matt meant we trust BMW not to spy on us so much as we trust BMW’s spying not to be in furtherance of the annihilation of the west.
I have a simple mind, and this is how I translate the pending Chinese EV 100% tariffs
The tariff just shows that increasing the number of EVs owned by the general population was never the goal, that brings me to point 1 or 2.
Maybe it’s a stupid take, but I don’t believe there is a true emergency, when market protection or reelection policy take higher priority.
Far too many want to use climate as an excuse to reorder society in their preferred arrangement. If it was really just about the climate and the dire rhetoric was actually true, we’d be geoengineering the atmosphere and implementing carbon capture on a massive scale.
Me personally, I think climate is important, but less important than decoupling from China and maintaining military-adjacent capability like auto manufacturing in this country.
We would be implementing carbon capture amd geoengineering the atmosphere if we knew how to do so.
But we are the last ones to ever and try and solve the actual problem, Europe is far ahead on green energy, recycling, waste reduction, and carbon capture.
https://www.cnn.com/2024/05/08/climate/direct-air-capture-plant-iceland-climate-intl/index.html
The whole problem is we DO know how to geoengineer the atmosphere. We’ve been doing it for over 200 years after all. We also know how to fix it: Stop wrecking it, stand back and let mother nature do her thing.
The problem is fixing the atmosphere that way takes much longer than wrecking it and the very lives of billions of people depends on the continued wrecking of the atmosphere.
TBH you seem far too smart to be making such a one sided and simplistic argument. Remove climate from your first sentence and replace it with any other hot button issue and you have just another useless sentence that doesn’t succeed in making the point you’d like. And the reason “we” aren’t implementing carbon capture and geoengineering, is because it costs money, and the powers that be would rather invest in known profit centers (oil) that will provide return during their life span, instead of future growth and profit.
Your final opinion is valid, but to disregard one social issue as an excuse to reorder society fails to take into account that is the objective of every law passed. – I expect a little better from you.
The comment ended up being a bit more meanspirited than I perhaps intended it at first, but I stand by it.
The rhetoric I have to read constantly is that climate is or should be our top priority, at the expense of pretty much anything else. But the actual things happening in society show that no one really believes that. Germany and New York state closing nuclear plants, environmental groups opposing transmission line construction to bring clean energy to places its needed, urbanists objecting to EV subsidies because they only want a car-free future, left wingers objecting to the IRA because it isn’t the Green New Deal, or risking its passage by trying to include unrelated stuff like equity and giveaways to unions, degrowthers objecting to everything, etc make me deeply pessimistic that anyone actually really wants to reduce emissions *no matter what*.
There’s just an overwhelming sense that reducing emissions isn’t enough, it also has to be done *my way*, whatever that might be, and frankly I find that to be ridiculous.
The general population of consumers has been told “you can have it all” for their entire lives. How do you now sell them on painful changes when there will always be an opposition politician saying it is bs?
You are right to be cynical because politicians will almost always go against their conscience and knowledge if there are votes to buy. They would argue that is so they can stay in power long enough to effect real change. Democracy is not good at rapid or revolutionary change.
The changes don’t need to be painful!
That’s a huge part of my beef. A lot of the environmental movement in this country has never moved beyond the 1970s mindset of degrowth, blocking new industrial development, reduce, reuse, recycle, and so on.
50 years later, we really can have it all. But people don’t want to let go of the old strategies, and so we get ridiculous things like the Sierra Club lobbying against transmission lines bringing emissions-free hydro power to populated areas.
No final bill will ever appease the people who wanted, or didn’t want it. That’s what happens in a society that values democracy (currently), where there are compromises. The IRA didn’t go far enough left for some folks, but you know what it did that it doesn’t get enough credit for? It’s bringing manufacturing jobs back into the country, and not just plastic do-dads to sell at the dollar store, but actual hardware that can make a long term impact on the world. Solar development, and renewable energy investments are good for everyone, the problem becomes whether a person is focused on this exact time frame, or one further in the future.
I would suggest reading less of the seemingly fringe sites, as I very rarely come across the argument that urbanist want a car free future. Even if this is a major goal of a group of people, they do not make the majority, and would still currently be considered fringe.
Don’t mistake me, I am a big IRA supporter.
What the last few years has shown me is that I should take the climate alarmists even less seriously than I already did. Because again, if they believed half of what they claim, there would be a lot less throwing soup at paintings and a lot more nuclear plants operating.
This is what a political debate should look like. I land on Taco’s side, but to see two opponents both use logic while not spewing lies and made-up nonsense is a pleasant sensation.
It’s because it’s more electable/profitable to ignore the climate crisis in favor of short term personal gain. Climate change is not a real issue to federal level elected officials because most of them will die before they feel the effects, and there’s to much lobbying money from corporations who will profit off of the status quo.
Just because soemthing’s a real emergency doesn’t mean elected officials will care about it if it doesn’t hurt their lobbying money and electability enough.
#2
But if anyone really cared, all we have to do is build about 40,000 of these and the lets roll coal the rest of our lives… But of course you have the massive US NIMBY problem.
https://www.cnn.com/2024/05/08/climate/direct-air-capture-plant-iceland-climate-intl/index.html
You only need about 1,944 of these 36,000 ton/year to remove the 70Mt needed to meet climate goals so lets say 2,000 to allow some redundancy.
So where is the power to run these things to come from? Iceland is unique in that it has a surplus of 24/7 geothermal power to draw on and a small population who aren’t consuming it. These plants only make sense under such conditions, else the world is better served by simply using that renewable power to eliminate fossil power elsewhere.
Maybe if the world had a surplus of nuclear but then you have cost and NIMBY problems too.
So yeah, good luck with that.
It’s #2.
Not to say that carbon emissions of (consumer) cars don’t matter – they do, just as much as any other carbon emissions – they just account for about 6% of the total, and switching to electric averts about half of that 6% at best. The consumer car share is bigger in the US (~15%), but the US is actually trended in the right direction already, via mechanisms that are much less expensive than personal 2000-lb batteries, if a bit slower than would be ideal.
Nowhere is trending in the right direction fast enough to stop the shitstorm that’s
comingstarting, because it has been too late for decades.Carbon comes from “the economy” because a fossil fuel energy revolution is the only thing that separates us from 17th century subsistence farmers. Every aspect of that revolution has to be re-revolutioned to fix the problem.
Take it a step further to the root, the Carbon problem comes from over population before the economy. Too many people, too much carbon.
In the moment, yes this is true, but there’s no reason to think there’s a fundamental link between population and carbon. We’ve already crossed over the point at which “renewables” are cheaper than fossil fuels, which in my opinion makes their eventual dominance inevitable. Yes, there are challenges. They’ll get figured out. The financial incentive of access to energy that doesn’t require spending money on fuel and then literally setting it on fire will ensure it.
70%+ of carbon emissions are rooted in energy production – we’re already most of the way there, we just don’t know it yet. In a few hundred years, the history books will gloss over the gap between this point and the dominance of renewables. I just hope it’s not all forgotten about because it’s so close in the timeline to a massive global war that kicks off when migration patterns intensify far enough that the world’s superpowers elect fascist governments.
No… It’s #3… which is “the emission reductions matter, but not at the cost of the local auto industry getting decimated by the auto industry from another country. We need to have both… the emissions reduction and a local auto industry that survives the shift to BEVs”
More EVs help us all – more EVs (assuming they are getting driven) means less gasoline is required to drive the fleet the same amount of miles. And since our U.S. refining capacity is not going up materially any time soon, having fewer gas burners on the road benefits us all since this will leave more gas for the ICE fleet.
Has it really been a decade since the F150 went aluminum? That sure blew over. What came of all the hand wringing about repair & insurance costs? Are the trucks really immortal in the rust belt like some hoped, or have we traded body rust for frame rust? If these are 10 years old, they’re approaching “beater truck” territory, and I would sometimes like a beater truck, as long as it’s not going to cost much to insure.
I live in the heart of the rust belt and I have not seen, or even seen a picture of, a speck of rust on any 2015+ F-150 or 2017+ Super Duty body.
I own a 2019 F350 and insurance costs are in line with other trucks I’ve owned. Fewer shops can perform repairs, but I haven’t noticed the costs being notably higher than other vehicles when I’ve had tree or work damage and such.
I mean, it should be impossible for there to be any rust on the body. Is the body 100% aluminum, or did they retain steel for the inside of the bed? I’d maybe be worried about galvanic corrosion if so, but I’m sure that’s also the first thing Ford’s body-in-white guys thought about.
So the frame is pretty much the only thing left to worry about, yeah? Easy enough to inspect… Real problem is I’m starting to consider Ecoboost engines to be Russian Roulette. It seems that everyone had had major engine work or outright failures.
The bed is also aluminum, remember the weird Chevy commercials where Howie Long would drop/throw a tool into the Ford bed with extreme force and it would rip it? Basically the way no reasonable person would treat either their truck or their tools?
The body is isolated from the frame by rubber bushings, so there should be nowhere for galvanic corrosion to appear.
I undercoated my steel frame before my first winter and hope to see the truck last 20 years or more. Of course, I have a good old NA 6.2 V8, not an Ecoboost.
I guess the trick will be to find someone like you who’s plans have changed enough to sell the truck. Thanks for the insight!
Not really. Through dissimilar metal corrosion I’ve seen Land Rover Body and bed panels corrode through as if it were rust. Once the bare aluminum and bare steel touch bad bad things happen.
During the lockdowns people were getting “new” F-150s with already rusty undersides due to them sitting in a Michigan parking lot for several months while waiting on chips.
My theory is that the drivetrains on the Aluminum F Series Trucks give out long before the frames do.
I recall seeing hundreds of F-series parked a raceway outside Louisville KY during Covid. I assume they were otherwise complete and waiting for silicon chips. The millions of dollars of unsellable inventory just sitting there was mind boggling.
Privacy concerns as a concept are a smoke screen. If the Government, or the majority of the US population, gave a shit, Section 702’s renewal never would have happened.
Blaming it all on the imaginary China threat is a pretty easy cop-out. China doesn’t give a shit how Bob Jones, mid-level manager at the local plastics factory, drives.
You know who does care? The CIA/FBI when Bob Jones’s third cousin, twice removed, puts up a video about “something, something…revolution”. Now, Bob Jones hears a funny click in his Alexa speaker every time he ties his shoes.
It’s as if we are all at the eye doctor’s office and instead of reading the letters on the screen, we are looking at the carpet, mentally trying to calculate the fiber thread count on that high-traffic weave. (which also comes from SE Asia).
If privacy was really a concern, they’d have passed a Temu ban, and not a Tik Tok ban. People are (rightly so) concerned about their privacy but largely ignorant to who’s really violating it.
When a press release includes a number that is rounded to the nearest 100,000 I assume it’s a number that’s been created for marketing reasons.
It’s one of those things that sounds wrong, but people struggle to conceptualize why. Clearly, a company isn’t going to sell at a massive loss, so the big loss numbers are largely a justification for high prices (“we’re already losing $100k, so this is a bargain for you”).
Assuming they continue to use the same platform and iterate upon it, those losses are clearly bogus, but we do have to account for development costs. It feels disingenuous to claim the initial cost of developing the platform against the first generation sales, but there is the possibility that they have to pivot to another platform as the tech changes. In which case, most of the investment in this first platform could be used on only one or two generations.
There’s not a good answer here. You have to account for development, and you can’t necessarily promise that the investment will bear out in a way that spreads it across several generations and/or multiple model lines. It feels shadier than it is, and it certainly feels weird to make it a focus by talking about a per-vehicle loss.
With all this said, one could make the cargument that the last year in a model cycle induced a $100,000 loss per vehicle (cough cough, it’s just that we only lost that amount in year 1, while handsomely making up for in the subsequent model years.)
Amortization is basically a riddle most people don’t get.
I think all development costs being borne out against total profits as they actually occur makes the most sense to me, since those expenditures and profits are occurring in the same year and development of new models feels like a cost of doing business, not a per-unit inventory cost. But I also think of development as having potential dead ends that would be losses unattached to a particular vehicle, as well as benefits that might apply to multiple platforms.
I know people who work in finance and could probably tell me all about the different ways to amortize these costs and how each would benefit a company…and I still wouldn’t know crap. The folks who do all the math take a lot of things into account, and it’s a lot. I’m sure there’s a major tax advantage showing these losses in the way they do.
The places I worked as an R&D engineer amortized our development costs for a specific project over a 5-7 year period depending on the company. Generally, the cost of a new product was a combination the actual purchase order price of all the parts that make up the product, the amortized development costs, the direct labor costs to make the product, and a share of the overhead (all the costs not related to making that product like R&D engineering, marketing, facilities, etc. aka overhead). I’m sure I’m missing some details but that how the cost of a product was determined. After that 5-7 year period, the development costs were removed from the product cost.
Yes, I believe it, but it’s a straw man. I have worked in R&D for over 20 years. So, that’s 20 years of my own salary that has to have been amortized across everything my companies have sold. That’s easily over $1million. I’m one of at least a million engineers working in industry. That adds up to $1 trillion collectively.
There is confusion about amortization of the R&D cost vs actual production costs. However, this article doesn’t clear it up. This statement is buried in a pull quote but is the most interesting part of the section imo:
If it were purely amortization of the original R&D costs, this statement couldn’t be true. The loss would only go down year over year. Since it went up, that tells me they’re posting actual per-car losses. What I’d like to know is do they sell the cars for more than it costs in materials and labor for a single truck. Based on the above pull quote, I assume the answer is currently “no”. That won’t get better automatically as the R&D costs are amortized over a longer period.
If they are losing that much on each truck and its not due to amortized costs, then the whole company is sunk. I could go buy the components and a new F150 and convert it to electric for less than $200k.
Yeah that number includes both amortization of R&D costs *and* per-unit losses as far as I can tell. The article implies that the 100K number is an accounting sleight-of-hand which is only partially true
To be honest, we still don’t know what costs are included because Ford may have a phased development plan and they spent a lot more in 2023 than in 2022. While the costs wouldn’t be direct costs of building the cars, they may still be amortizable.
Yep there is no way to know based on the information given.
I hate things like the $100k loss per car. I wish they would just say “we spent X million on developing it, and have not been able to make that back yet” but I mean the actual cost of building the cars has to be so much less than $100k and they just haven’t paid off the R&D yet which I feel like is pretty normal. There’s a reason cars go 6-10 years per body style and just get mild upgrades during that time, they have to be made for a while to pay it off.
Yeah about that….here’s the key line from the article, after which nothing more needs to be said
A Chinese auto company paid for journalists to come over to a hostile country, wined, dined, hosted in luxury accommodations no doubt. and showed them cars in a highly controlled environment in a language they presumably do not speak. I’m supposed to believe anything that is subsequently written is objective?
Unless they were under contract to only write positive things, yes. It’s no different than when DT went to the Toyotathon event for the Taco and whatever else was there. Sure it’s in a different country, but no journalist looking to stay employed is going to write a glowing review for a garbage product. He went to China, checked things out, went home and wrote about it. No one was holding a gun to his head to make him write nice things while confined to a prison cell in China with the only way out being to say nice things.
I think the truth lies somewhere between your two comments. Incentivized reviews should always be somewhat suspect, even if they are ubiquitous.
What’s more relevant to me is that anyone who is publicly critical of the Chinese autos will probably not be allowed back by the Chinese government when its time to review the next model year.
Fair. Things are not as black and white as both he and I stated, life is grey for sure.
This is just patently not true. There are plenty of publications that write glowing reviews of garbage to keep access to early review units. It’s not a gun to their head but it’s getting later access than the competition that is at stake.
Ok then no journalist worth a damn does that. And Kevin is worth a damn. Yes some publications suck and do not care about journalistic integrity, but I do not see him going that route.
Who’s Kevin
Kevin Williams, he was the one who went to China and gave the review referenced above.
Is he the guy who makes paint too ?
No idea. Maybe
Oh wait no that’s his brother Sherwin
Haha I get it now. It’s too early
There may be no gun to his head, but if it’s a mediocre product, it probably benefits the reviewer to embellish it. If they are known for negative reviews, they won’t receive product to review in the future and their livelihood depends on those future reviews.
ok fair, but you also have to look at what everyone is saying. Several journalists went to Mexico to check these things out and were impressed, several have gone to Europe and done the same. Whether we want to accept it or not, these cars are decent, above average even is the overwhelming consensus.
Oh, I know nothing about the actual products. They may be world class or they may be terrible. My only point is that it’s difficult for a reviewer who does not buy the product off the shelf to pan something that is mediocre because their livelihood depends on future access to products for review. Now if something is bad (i.e. Vinfast) they would lose credibility by saying it was good and it would reduce the perceived value of their future reviews.
Yeah, I think Cars.com is literally the only publication that does it this way, and they do not get nearly as much foot traffic because they don’t have the funds to get a hold of many cars. Truth be told, I didn’t even know they had a news/reviews section until Stef went over there and that made me want to see what it was all about. Everyone else reviews stuff on invite from the automakers, and automakers welcome even the critical feedback (except Tesla, because Elon is sensitive) because it gets them the publicity.
Cars.com and Consumer Reports are the two major publications I know of that buy their test vehicles. It’s a massive financial undertaking that the vast majority of other publications cannot afford. But it also doesn’t always result in better reviews. For the longest time, CR’s car rating system looked a lot like Doug DeMuro’s, which was weighted to favor hyper-luxury cars, which is arguably pointless when people just want to know if this year’s Corolla is worth buying.
With that said, accepting an invitation or a press loaner from an automaker doesn’t mean you have to be nice. David eviscerated Subaru’s joke of a skid plate on the Wilderness models, and they’re still a bit unhappy about that. Meanwhile, I caused an all-hands-on-deck moment at Polaris when I explained how people felt about Indian Motorcycle’s name and iconography.
So you and David pointing out faults makes me ask, you say they are unhappy, has that resulted in you not being invited to review something else? Has it had any negative impacts or just them being less excited to talk to y’all?
I’m not sure what the sitch with Subaru is, but in the case of Indian, nothing happened other than the single comment from the PR person. I still get invited to try new bikes!
As a Polaris shareholder, good to see they’re staying classy.
I don’t know of any blowback from Subaru, nor do I particularly care if there is.
And that’s exactly my point, journalists getting invited to China to review cars isn’t something that’s going to happen all the time, so the blowback from deriding the cars would not be all that impactful, and most journalists with any credibility don’t care. They may word things slightly less harshly, “this is poorly designed” vs “this is straight trash” but the point will still be made.
> I caused an all-hands-on-deck moment at Polaris when I explained how people felt about Indian Motorcycle’s name and iconography.
Big sigh.
I don’t think his intent was malicious, but I do think he was shown a highly controlled environment, limited by language to asking questions that his hosts wanted answered, and nudged by them into writing the type of piece they want published.
The Soviets did the same thing when Western journalists came to visit them.
https://www.nytimes.com/2023/07/03/books/red-hotel-alan-philps-moscow.html
The author of this story, Kevin Williams, wrote a pretty massive takedown of the VinFast VF8 after being hosted by VinFast under similar circumstances. I think he’s probably pretty much on the money here.
Ask yourself who has more power to ruin careers in the automotive world, VinFast or Geely/the CCP?
The universal public flogging of Vinfast was exactly to provide the type of “but wait, objectivity” comments that you are now posting.
Arguably, writing a puff piece about Chinese EVs could cost someone credibility and access to non-Chinese companies. I think there are risks in multiple directions here. I can’t speak to what choice anyone might make, but I wouldn’t necessarily assume that a person should fear a loss of access to Chinese vehicles any more than being muscled out of other spaces.
Been going on for decades- Half century ago a C&D writer told me of Porsche’s wrath after a poor review of the 914, C&D cowered and literally stopped the presses. At the close of the last century Daimler got miffed when one of the trucking publications had a veteran Consolidated Freightways driver review their replacement for the ancient Freightliner conventional and he was not happy. The story ran but the magazine found a less qualified test driver who wrote a more favorable review. Today it’s gotten much worse- The big automakers vet writers and if you’re too objective they deny access. As a small time blogger who writes mostly about motorcycles I don’t even try to jump through the big automakers hoops…
I once heard or read that Eric Schenkman is a great guitar player, but I could never listen to enough Spin Doctors to see for myself.
Not hard to believe. There are a lot of really great musicians that have been hamstrung by the music business machine and aren’t allowed to showcase their real talents.
As an accountant, I always question it when someone says so and so loses x amount on each car. If those are ongoing production costs, it paints a bleak picture. If it amortization of R&D, less bleak. It’s like me saying my car has cost me $6 per mile over the last 1.5 years. Yeah, it cost $30k, but I’ve only driven it 5,000 miles.
Also an accountant, and this is a sentiment I always try to relay to non-finance people. Numbers can always be used to display an outcome you want to show, but that doesn’t mean it’s the reality of those numbers.
Games can also be played on depreciation schedules, taking something from a $10k cost a month and ramping it up to $100k a month by shortening the schedule, (what I think ford may be looking at), however if all the costs are depreciated early, but the equipment remains in use, it then has a $0 year cost after it had been fully depreciated. So Ford could be looking to depreciate/write off losses in EVs when they have a strong balance of ICE sales to absorb it. Then after “big EV losses” are recorded they will have lowered the cost of production simply to the raw materials and labor associated with induvial vehicles.
I’m curious if Ford is taking some accelerated depreciation tactics when it comes to fixed cost expense to transition to EV manufacturing. They could look to front load the depreciation hit while they still have ICE revenue, thus improving the future outlook as they transition to a larger EV share of production.
Accelerated depreciation is a tax concept. For tax purposes, you would use accelerated depreciation to lower current income as much as possible, which may not be desirable from a financial statement perspective. Financial accounting strives to match the cost to the period when it’s incurred (i.e. the useful life of the asset) so financial statements would probably not not use accelerated depreciation unless it was required for some reason, such as on an asset that loses more value in the beginning of its life than ratably over it’s life.
But you still see the impact on the P&L if they are going that path.
Actually, the tax reporting would differ from the financial reporting. The difference would be accounted for on a schedule attached tot he tax return. The financial statements a company files with the SEC and provides to investors is always different from the tax return because financial accounting standards are written by accountants while tax law is written by congress and the two don’t match.
Two things were talking here….the tax implications resulting from accelerated depreciation, and the actual hit from the accelerated depreciation as seen on the P&L. Anyways, cars are cool…
I understand all of those individual words, but none of the sentences.
I like how Toyotas uprising, is coming with fords downfall. 🙂
It’s far more fitting than many realize. Ford did the automotive production line first, but it’s the Toyota Production system that is taught in engineering classes today, and is the standard in industry.
Toyota also had the first production hybrid, and ford is unreliable after the warranty expires. Toyota is the only car brand with cars that have 1 million mile clubs.
Owning some Fords often feels like you’ve been hit by a club for a million miles.
Laughs in Mercedes.
I feel Ford in more recent years has been pursing more modern tech in their cars, ie EcoBoost, EV, aluminum construction, etc. Sometimes it pays off, sometimes it creates more headaches/teething problems. Consumers can become the guinea pig sometimes.
Toyota tends to stand back and observe, while continuing to utilize older tech that has been proven/shook down. This can make for much more reliable vehicles.
Toyota has the right idea.
Ecoboost is crap.
Love my 2.0 Ecoboost in my 17 Escape*.
*: Ford replaced, under warranty, the long block with a new redesigned ’21 model due to a ‘coolant intrusion’ issue.
If I didn’t do my own oil changes, I wouldn’t have noticed that I was very slowly loosing coolant. Looked up on Escape forum and started to panic since I had 2 months left on factory warranty. It worked out good for me, but many people got and are still getting screw on this issue. Ford should have extended the warranty for these engines to at least 100k.
Last summer I sold our ’02 Lexus RX300 for more then I paid for it several years ago with 220k. I much preferred driving the Escape and it has better mileage/power/handling than Lexus. Helps that I replaced the Lexus’s timing belt and water pump when I bought it at 160k.
They wont move it to 100K or they would be replacing it on almost everyone’s car.
Ever heard of planed obsolescence? it’s the same reason why lightbulbs burn out in a year or 2, lightbulbs could last for 10’s of years, but they are generally engineered to fail so you buy more of them.
Then why is Toyota moving to turbocharged engines in their trucks?
Because they can do it right. They watched fords failures and learn.
Also, fords are great… until the warranty expires. Toyotas are great even after the warranty expires.