In the ongoing race to claim second place to Tesla in the U.S. electric vehicle (EV) market, Ford Motor Company initially sprinted ahead, debuting its Mustang Mach-E in 2020. Designed as a sporty electric SUV inspired by the classic Mustang, the Mach-E gave Ford an early edge over General Motors (GM) in the EV sector. However, as of this year, the competition between the two Detroit automakers has taken a new turn, with GM’s EV sales climbing and Ford encountering substantial financial setbacks in its electrification journey.
The most recent indication of Ford’s challenges emerged on Monday, when the company disclosed a $1.2 billion loss from its EV division, Ford Model e, for the third quarter, bringing total losses for the year to $3.7 billion. Although Ford’s overall revenue rose by 5% to $46.2 billion, the company’s net profit dropped by 24% year-over-year, reaching $896 million. Ford’s Chief Financial Officer, John Lawler, acknowledged the company’s financial hurdles, noting, “Our strategic advantages are not falling to the bottom line the way they should because of cost.”
Ford’s Struggles with EV Demand Contrast with GM’s Profitable Growth
Ford’s EV lineup includes the Mustang Mach-E, the F-150 Lightning pickup, and an electric Transit van. Despite promising launches, these models have struggled to maintain momentum amid cooling consumer interest and rising production costs. Ford’s strategy relied heavily on outsourcing battery production, with suppliers like LG Energy Solution, SK On, and CATL providing battery packs from facilities in Poland, Georgia, and China. Ford also invested in dedicated assembly lines and expanded capacity, anticipating strong demand. However, as consumer interest waned, Ford was forced to cut production and lower prices, stretching profitability further out of reach.
In contrast, GM’s EV strategy appears to be paying off. With significant investments in standardized battery technology and new manufacturing plants, GM’s electric models have seen strong sales growth. Last week, GM reported a $3 billion profit for the third quarter, consistent with the previous year’s results, and expects to close the year with record earnings near or above $10 billion. Although GM, like Ford, faces initial losses on its EV models, it has indicated that it could soon reach profitability for each vehicle on a variable cost basis—covering manufacturing costs, excluding fixed expenses like factory and equipment investments. This optimistic outlook reflects GM’s more cautious, longer-term approach to EV production, prioritizing a standardized battery platform and in-house production to streamline costs and bolster profit margins.
Ford and GM: Divergent Strategies in the Race for EV Dominance
The disparity between Ford and GM highlights the different paths the two automakers have taken toward electrification. Ford adopted a rapid, supplier-based approach for its early EVs, including the Mach-E and Lightning, which preceded the upcoming Tesla Cybertruck by more than 18 months. While this accelerated timeline allowed Ford to gain a temporary lead, it also led to high dependency on external battery suppliers and added costs. GM, however, opted for a vertically integrated model, partnering with LG Energy Solution to create the Ultium battery platform, a standardized, scalable battery system designed to power its entire EV lineup. This approach, coupled with new, dedicated EV factories, positions GM to control costs more effectively and potentially achieve higher profitability on each vehicle sold.
Ford’s current EV challenges are not unique, with other major automakers like Volkswagen and Rivian also grappling with the economic realities of EV production. However, GM’s gains underscore the importance of a well-coordinated approach to electrification as it takes strides toward profitable EV production.
Ford’s road ahead will likely require reevaluation of its strategy to improve cost efficiencies and strengthen profitability as consumer demand for EVs continues to evolve. In the meantime, GM’s growing foothold in the U.S. EV market signals a shifting dynamic among traditional automakers, as each pursues a different path to meet the demands of an electric future.
