A parking lot with employees' vehicles at the Ford assembly plant in Oakville, Ont., on March 19, 2020.Nathan Denette/The Canadian Press
Ashley Nunes is a senior research associate at Harvard Law School and teaches economic policy at Harvard College.
Ford F-N is tapping the brakes on its riskiest project to date. Earlier this week, the auto giant announced it is delaying production of an all-electric pickup truck and SUV. The latter – which has three rows of seats and is manufactured in Oakville, Ont. – will now only hit the road in 2027, two years later than expected. In announcing the delays, Ford chief Jim Farley emphasized the importance of “scaling a profitable EV business” and “using capital wisely.”
Put simply, Ford wants to make money. The problem? Where electric cars are concerned, the company has perfected the art of losing money. In 2023, Ford racked up US$4.7-billion in related loses. That figure is set to rise to US$5.5-billion in 2024. By one estimate, Ford loses more than US$36,000 on every EV it sells; hardly chump change. Although it’s little consolation, Ford isn’t alone. General Motors has also racked up billions in EV-related losses. Tesla is admittedly an outlier although – spoiler alert – the company’s bottom line has historically been padded by government coffers (and other automakers).
EVs clearly have a long way to go before they can make money for automakers. Why, many argue, comes down to an EV’s most prized valuable (and pricey) asset: the battery. These batteries reduce our reliance on gasoline – a climate killer. But there’s a trade-off. Batteries are made from rare minerals such as cobalt, nickel and lithium (to name a few), which collectively account for a hefty part of the vehicle’s production cost. Higher costs mean higher prices for consumers. This is why EVs cost tens of thousands of dollars more than their gasoline-powered counterparts.
EV proponents often argue that things will change. Over time, costs will fall and as they do, so will prices. Falling prices means widespread adoption. Widespread adoption means a cleaner, greener planet. It’s a compelling narrative but one riddled with blunders.
For one thing, falling battery prices don’t guarantee that EV prices will follow. In fact, history suggests the opposite is true. In 2011, EV batteries sold for more than US$1,000 per kilowatt hour (a commonplace measure of battery size). By 2017, that figure had dropped to US$250, and in 2022, batteries cost just US$153 per kilowatt hour. Falling prices should have benefited consumers. Except they didn’t. During the same time, EV prices rose from US$43,871 in 2011, to US$62,760 in 2017, to US$74,460 in 2022. EV prices did drop in 2023 but these drops reflect waning consumer demand and haven’t been welcomed by auto investors eager for widening (rather than dwindling) returns. Put simply, selling EVs isn’t profitable, and no one really knows when (or if) they ever will be.
More importantly, even if EVs were profitable to sell, prices were low and consumers adopted them in droves, there’s little guarantee this would benefit the planet. The reason? EVs may be clean to drive but they are dirty to build. In fact, some studies show that the high carbon intensity of excavating minerals used in EV batteries makes manufacturing an EV worse for the planet compared with building a gasoline car.
Because of this, the only way for an EV to reduce emissions is on the road. More kilometres driven in an EV means more climate benefits. But, as Bloomberg’s Kyle Stock notes, “If a vehicle is going to be sitting idle in a garage, a gas-burning version is arguably a cleaner option than an EV, because of all the carbon that goes into making the latter.” Worryingly, studies show that EVs are often driven less than their gasoline powered counterparts. This raises questions about whether the technology can deliver the climate benefits touted by EV proponents.
One of the biggest proponents is the prime minister. Justin Trudeau has committed billions to prop up the EV industry, touting the virtues of electrification from coast to coast, and pursuing policies that ban non-EVs from hitting the road past 2035. Such policies, we are told, reflect “the excitement Canadians have for electric vehicles.” But Canadians aren’t excited. Growth rates for EVs have cooled considerably as consumers balk over the price of going electric. One auto analyst has blamed the slowdown on “a serious demand issue.” You think?
Therein lies the rub. Consumers think EVs cost too much, corporate balance sheets suggest they cost too little and the ruling class don’t seem particularly dialled in to either reality. It’s probably just as well. No one said going green would be easy.