It seems like the competitiveness in the electric vehicle space is finally paying off as battery-powered cars are finally getting cheaper to make. Battery costs are dropping, material costs are down too, and even the average transaction price of new vehicles seems to be stabilizing a bit (although they're still high).
But hold your horses—that doesn't mean that most automakers are actually making money on EVs. Quite the opposite, actually; many are still holding huge losses over their heads. Ford's third-quarter earnings show just how deep some legacy automakers truly are, and how hard many are clawing to pull themselves out of EV-induced debt. And Ford has another concurrent problem too: warranty costs.
Welcome back to Critical Materials, your daily roundup for all things EV and automotive tech. Today, we're chatting about Ford's continued EV headache, Xiaomi SU7 Ultra's ultra-impressive Nurburgring record, and Mexico's warning over the U.S. banning Chinese automotive software. Let's jump in.
30%: Ford's EV Headache Isn't Over Yet
General Motors recently announced it was making progress on the long-sought goal of profitable EVs. Ford, unfortunately, has not been so lucky.
Ford's third-quarter financials are out and if there's one clear takeaway, it's that EVs continue to pose a pain for the Blue Oval despite advancements in tech and cost-cutting measures. Now Ford warns that EV-related costs will eat into its year-end profits more than expected.
Ford expects its losses on EVs to reach as much as $5.5 billion this year, $2.5 billion of which was amassed during the first half of 2024. The third quarter was exacerbated by the realized $1 billion loss of a "previously disclosed" canceled EV program, presumably, Ford's scrapped three-row SUV. The good news is that the automaker said it managed to cut back on EV-related costs by around $500 million last quarter (half of the $1 billion in material and battery cost reductions year-to-date), which is a huge year-over-year step for the automaker. But the bad news is that it's still in the red.
Ford CEO Jim Farley says the company's top priority is cutting down on those losses so it can start becoming profitable in the EV sector. Becoming profitable isn't easy amid an ongoing price war amongst your competitors (Ford is calling this "industry-wide pricing pressure") while also trying to figure out how to compete against the threat of affordable Chinese EVs coming stateside. Farley knows just how dangerously good some of China's offerings can be, and that can pose a real thorn in the side of American automakers should they be unphased by government-imposed tariffs.
“It’s going to be a very competitive market and that’s what we need to be prepared for," said CFO John Lawler.
To add to the headache, Ford's second gut punch is higher-than-expected warranty costs. Ford has struggled with reliability, expensive recalls and quality issues for years now, and between those and the EV stuff, it's kind of getting crushed in two different ways. The brand says that safety recalls and other fixes related to warranty repairs continue to eat away at its bottom line. That might not improve in the short term either, especially as the brand pumps out more EVs.
Jim Roche, CEO of WarrCloud (an automotive warranty processing company that works with some OEMs like Ford) previously warned that EVs are creating this weird conundrum for automakers where customer pay opportunities for service work are decreasing, but warranty-related work is experiencing an increase as the new tech gets fleshed out. It seems like Ford could be experiencing that first-hand already, though.
60%: Xiaomi SU7 Just Clobbered The Porsche Taycan and Tesla Model S on the Nurburgring
Smartphone company turned automaker, Xiaomi, has made some huge waves in the EV market with its new SU7. I mean, when you can't get Ford's CEO to give up driving the car, you have to be doing something right, right? Well, apparently, Xiaomi is particularly good at another aspect of cars—speed—because it just absolutely annihilated every other EV sedan around the Nurburgring Nordschleife.
You read that right—a Chinese electronics company just bested the uber-fast Porsche Taycan and Tesla Model S Plaid around a race track with a variant of its first-ever production car.
Xiaomi sent two stripped-down prototype versions of the 1527-horsepower SU7 Ultra to the track on Monday where it prepared to absolutely dunk on practically every other car maker in the world. The final time? An extremely quick 6 minutes and 46.874 seconds, making it the quickest four-door 'round the Ring ever.
Check out this video below to watch the EV shred around the track:
In terms of sedans, EVs have already sat comfortably at the top of the Nurburgring's record list. But this speed run ousted every single sedan currently on the leaderboard, regardless of powertrain. It even usurped the Porsche Taycan from its throne, making light of its 7:07 lap time by shaving a cool 20 seconds off its lap time. And Tesla's uber-fast Model S Plaid? Well, the SU7 Ultra beat that out by 38 seconds too.
I want to put this speed into perspective for a second. It even beat out the $2.2 million Rimac Nevera, which has more horsepower and is, by definition, the quickest production car you can buy from an automaker today with a zero-to-60 MPH time of 1.74 seconds (the SU7 Ultra does the same sprint in 1.97 seconds). The Nevera did the lap in 7:05.
If you're not impressed by those numbers, allow me to stir the pot even more. Xiaomi managed to set the record despite the car malfunctioning and completely losing power for 12 seconds during the run. And the track was partially wet. So excuse me while I give this smartphone maker a bit of a bow for its efforts.
More on this later today on InsideEVs.
90%: Mexico Says Biden's Ban On Chinese EV Software Will Hurt The Auto Industry
It almost feels like a never-ending soap opera: China's Auto Industry Versus The World. The installment's latest cliffhanger comes from Mexico's Ministry of Economy, which is warning that the United States' proposal to ban Chinese hardware and software could have a "substantial impact" on the country's auto manufacturing industry.
The auto industry in Mexico is huge. In fact, the U.S. Department of Commerce calls it one of the country's "most significant industries" noting that it makes up 3.6% of the country's GDP. Automakers from around the world call Mexico its manufacturing home, including BYD from China and plenty of automakers that currently do business in the U.S. However, Mexican officials are now concerned that the proposed U.S. ban on certain Chinese-sourced hardware and software in vehicles could result in global automakers pressing pause on production while they sort out what to do next.
Here's the beat from Automotive News:
Mexico’s economy ministry said in a filing Oct. 28 with the U.S. Commerce Department the proposal could have a “substantial impact on Mexico’s automotive industry. Economically, it poses potential trade barriers, disruptions to supply chains, increased production costs, and a possible risk of reduced direct and indirect employment.”
Automakers and tech groups separately asked the Biden administration for changes and for more time before the rule takes effect.
The proposal marked a significant escalation in U.S. restrictions on Chinese vehicles, software and components and would effectively ban the import of Chinese brand vehicles—even if they were assembled in Mexico.
That last sentence is really the kicker. After all, it could, at least backhandedly, provide another advantage to domestic automakers worried about the Chinese auto industry targeting the U.S. consumer.
Chinese automakers have been eyeing the possibility of squeezing into the U.S. market through Mexico for some time. It's not something lawmakers are blind to—they know it's happening and have warned against it, even congressionally, since 2021.
It's also not just China that will suffer. As we've explored in the past, automakers use the U.S. Mexico Canada Agreement (USMCA) to ensure favorable treatment when it comes to duty fees, which includes toeing the line of sourcing requirements. But banning links to Chinese software and hardware? Well, that's a whole new ballgame that even domestic automakers won't be able to circumvent.
Of course, the U.S. Commerce Department says that this ban isn't about quietly preventing an influx of affordable EVs from China—that's a job for the 100% tariffs. According to the Department, the ban is all about national security, albeit with some rather convenient timing. The Commerce Department told InsideEVs previously that the regulations were more "preventative." It also noted something which the Alliance for Automotive Innovation agreed with: "very little technology" in the connected vehicle supply chain enters the U.S. from China.
However, the ban, if approved, would uproot an otherwise stable supply chain and cause some disruption if not preemptively planned for by U.S. automakers. After all, if the pandemic wasn't evident enough, most automakers aren't set up to swap crucial components or supply chain partners on the fly.
So that means Mexico could be right about the ban being a potential disruptor. The proposed ban could mean that Mexico's auto manufacturing centers could face issues as automakers rush to source new components, write new software, or maybe even outright drop certain models in the name of regulatory compliance.
100%: Are Dealers Wrong About Scout?
Now, I'm a big fan of what Scout has shown in its production concepts. Big fan. These re-envisions of an American classic are what the EV sector wants (and frankly, what the Volkswagen group really needs) in order to attract skeptics. It's a particularly cool-looking, capable truck with the trifecta: brains, brawn, and beauty. The range-extender option seems to be a great move, too.
Add in a hassle-free buying experience and you've all but sold me. However, dealerships aren't seeing it in the same light. They're royally pissed off that VW is side-stepping franchise laws with a new brand and now they can't get a piece of the pie. But is cutting out dealers really the answer that consumers want?
Don't get me wrong—I hate markups as much as the next guy, but until you've dealt with a brand that controls the entire chain down to the service level, you start to see where corporate rules and local leeway clash. I mean, just look at all the folks complaining about how bad Tesla's after-sales service is. For years this has just been considered "the norm" and often linked to the direct sales model. Rivian hasn't exactly gotten glowing reviews in recent months, either. And don't get me started on Fisker.
Are we ready to take the service gamble on Scout and see how a major, established OEM can handle this type of service? My gut says "yes," but my heart says "maybe not so fast." What does yours say? Let me know in the comments.
