Ford's newly discovered Mustang Mach E will begin to make a profit "on number one vehicle," Ford CEO Jim Hackett said in an interview with Bloomberg after the Ford Mach E event was revealed Sunday.
Hackett specified that the cost of manufacturing a car would be lower than the revenue generated from its sale from the outset. The automotive line will still have to cover the original R&D costs before it becomes "profitable" for the company, but this is true for every vehicle line.
Hackett mentioned that this should surprise many people, since "electricity had no history of making money." "We've heard this from other manufacturers before. Many apologize for dragging their feet with electric cars because "no one makes them profitable."
But in fact, Tesla made a profit even from the original Roadster. As Tesla has grown rapidly since then, the positive margins they make on their cars, together with as much money as they could accumulate, have returned to expanding the company, which is currently operating at a profitable rate.
Even other vehicles that produce a "loss" per unit for their company are often useful projects for various reasons. If they hadn't, the companies probably wouldn't have sold them.
One, electric cars help reduce vehicle fleet emissions, which protects them from regulatory sanctions for public health harm (which is obviously better for the public).
Second, these programs help companies position themselves strategically for the inevitable electric future. Long-term planning is important.
So all this talk of profit is a little unnecessary, but it's good to see Ford dispel the myth that EVs can't be profitable. It is extremely impressive that the company has taken this car from concept to production in less than three years and will be able to make it profitable.
Hackett was also asked why Mach E would be built in Mexico, This is interesting, as we recently announced a Ford Union agreement that said "Mustang derivatives" would be built in Flat Rock, Michigan. At the time, we assumed it would involve Mach E, but apparently Ford will take some time to step up its electrification efforts in US plants.
They will have to move fast, as Hackett said in an interview that Ford plans to be carbon-neutral by 2030. The company has big plans to start selling more electric cars in China and Europe in addition to the US.
When manufacturers claim that no one makes electric cars profitable, they often downgrade Tesla by saying that they are doing some voodoo math (also known as "50% company expansion" + per year, which is usually expensive ").
But talking about voodoo math ̵
Of course, the request itself is absurd because it divided the price of all R&D vehicles only through the first few thousand units. Every vehicle (and indeed any "gadget" of any type) that has ever been manufactured has paid some amount of R&D costs that must be paid before you start making money. Only after selling the item for a while do you manage to make any profit.
Former Fiat CEO Sergio Marchionne makes similar claims to the Fiat 500e, which he says loses $ 14,000 per vehicle sold. If that was really the case, why keep selling them? Maybe because his company would be less profitable if he didn't sell them, as he would be punished (even more) for running the most efficient carmaker in the US – meaning the 500e didn't actually lose his company money after all, in a holistic sense.
By the way, Marcione also said that Fiat could have a Model 3 competitor on the road within 12 months if the car proves profitable. Marchionne is no longer around to hold back his company's EV efforts, but unfortunately we haven't seen this car yet, though Tesla proves that the Model 3 can be profitable, just like that, just over 12 months ago.
I would like to offer a different reason, however, why Ford is able to make this car profitable: because they are actually trying .
When other manufacturers declare that they cannot make cars profitable, it is usually because they throw out a bunch of money in an incompetent Frankenstein car. They wedge expensive low-volume components into vehicles already built, with all the design and packaging trade-offs that go along with it.
Then, surprise the cars were unattractive to consumers and the company didn't bother to try to sell them anyway. They wonder why no one wants a car they've ever thought of, and then pour some money into laundry campaigns in only one state (California), which is proving to be one of the more expensive media markets do this.
And the cost of all that R&D and marketing is split between the several thousand cars that are barely scraped by selling because they don't really try to sell the car much. No wonder "making no money" on cars seems to be actively sabotaging their ability to do so.
This is not just about electric cars, it's about every change in the automotive industry. They are so stubborn about the automotive industry that they will make their own efforts by lobbying against a change, then lobbying against the change they are lobbying for, and then changing their mind a third time. Fortunately, Ford, BMW, Honda and VW have finally come to their senses and accepted the obvious change that is ahead.
Toyota is an appropriate example in this area. They claim to be developing a lot of EVS, but they are running illiterate anti-EV ads. Then they lobby for fuel economy standards, as opposed to their fake "green" image. They do their best to make their own work difficult, simply because they are stubborn and would rather not change in the auto industry.
So many major automakers would prefer to just keep making the same cars, with a 1% improvement on some pointless performance every model year, and in fact never be forced to step out of the impossible-narrow path they built for yourself through decades of complacency.
And that is the problem with the entire automotive industry in a nutshell. – Except, it seems, Ford. In fact, by putting some effort into making a good car, with a good brand attached, and thinking about marketing, production and sales and customer support, they have been able to come up with a car that we can be sure will work well for them, and that consumers they respond well and even make some money.
There is much to see, there is still a lot of ground between now and the end of 2020 when this car goes on the road. But it looks like Ford has chosen another great idea to steal from Tesla: the idea of is actually trying to make a good car . Who would have thought.
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