Car making has always been one of the biggest cash-eating industries globally and margins have typically been slim, even in the good times.
The shift to electric cars is a big fat tick in the ‘bad times’ column, as least as far as global firms' accounts departments go. Profits are being munched as cheap combustion engines are sidelined for expensive batteries.
However, battery prices having been falling for a while now, with lithium prices in particular having dropped 85% from their peak in 2022, according to data from the International Energy Agency (IEA).
That has brought the average battery pack price down to below $100 per kWh (£77/kWh), “commonly thought of as a key threshold for competing on cost with conventional models”, according to an IEA research document published in early March.
Prices are expected to drop another $3/kWh this year, according to estimates from research provider BloombergNEF.
Batteries have an outsize influence on the price of an EV, accounting for around 40-60% of the price, depending on which manufacturer you talk to.
So do the price falls mean that EVs are now heading into the black? Not that you would notice.
Of the pure EV companies, only Tesla has shown evidence of profit making. And while that’s a huge achievement, the company has long been propped up by carbon credits, government incentives and reliance on cheap manufacturing in China.
Tesla’s great rival BYD also makes money – the equivalent of £2.7 billion in the three quarters to the end of September 2024, according to its latest published figures.
However, as well as enjoying similar benefits to Tesla in the form of state subsidies, BYD’s sales last year were 60% plug-in hybrids, with the rest EVs; and while there's no way of telling which contributed more to the bottom line, PHEVs are generally higher-margin, given their smaller batteries.
Few companies explicitly break out EV profit and loss. One that does is Ford, and it’s not a pretty sight. Its Model E division lost $5.1bn last year, a worse result than 2023 by $375 million.
Partly that’s because Ford is spending big on a battery plant as well as developing a new smaller EV car platform at its ‘skunkworks’ division in California.
This year will be no better, with losses predicted in the region of $5bn-$5.5bn, Ford CFO Sherry House told analysts on the company’s February earnings call.
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