The uncomfortable truth of the shift to electric vehicles is that automakers have to reinvest profits from their gas car businesses to fuel the capital-intensive development of EVs. Only Tesla and a handful of Chinese EV makers like BYD and Li Auto are known to be profitable today. Others are struggling. Take Ford, which is projected to lose $5.5 billion from its Model e EV unit this year and now it’s ringing an SOS to its suppliers: “We need help."
This kicks off today’s edition of Critical Materials, your daily round-up of news and events shaping up the rapidly growing EV industry. Also: General Motors and battery maker LG Energy Solutions resolve a lawsuit regarding Chevy Bolt EV fires, and Tesla CEO Elon Musk's plans to use data from China to advance his self-driving ambitions.
30%: Ford Wants Ideas From Suppliers To Cut EV Costs
Despite posting robust growth in Mustang Mach-E and F-150 Lightning sales in the first quarter of 2024, Ford is still losing billions of dollars with its EV business.
Industry-wide price cuts and high production costs have contributed to the brand losing some $1.3 billion in Q1 2024 alone and losses are projected to grow to some $5.5 billion by the end of the year, according to the company’s earnings forecast.
Now, Ford is asking suppliers for help. The brand has issued a “call to action,” asking suppliers for ideas to reduce production costs, according to an internal memo obtained by Crain’s Detroit Business.
Here’s an excerpt from that report:
“We have all invested heavily in the success of the EV business, and we will all win or lose together,” Liz Door, the automaker’s chief supply chain officer, said in the memo. “To enable affordability, it is of paramount importance that our EV portfolio achieves further levels of material cost efficiency.”
In the memo, Ford asked suppliers to develop “incremental cost-reduction proposals” for a list of electric vehicles both current and upcoming, including the F-150 Lightning pickup, next-gen P800 electric pickup, Mustang Mach E, E-Transit van and large electric SUV.
“We need your best ideas to drive cost reduction, even if they have been previously rejected by Ford,” Door said in the memo. “We also would be willing to consider ideas that may require investment but support profitability. Everything is on the table.”
Ford suggested suppliers reduce costs across “commercial, design, content, footprint and value chain.” That also includes “adjusting capacity quickly downward where necessary” and “repurposing capital as needed.”
What this would encompass is anybody’s guess. It could entail delays for future affordable EVs, further cutting back production of existing models, or possibly layoffs—which have an incalculable human impact as we recently saw with Tesla’s brutal dismissals.
This issue is not unique to Ford. General Motors also went into a cost-cutting mode last year after major software issues with its EVs and losses from its struggling Cruise self-driving robotaxis. And Stellantis has also made it clear that it has put its EV business on a diet.
As the report correctly pointed out, larger suppliers may be able to absorb these losses, but smaller ones might struggle to survive. Suppliers’ reactions to Ford’s demands would be worth keeping an eye on in the coming days and weeks.
60%: GM And LG Energy Settle Bolt EV-Related Litigation
Two years of Chevy Bolt EV fires emerging from defective batteries caused nightmares for owners and the companies involved, General Motors and its battery suppliers LG Energy Solutions and LG Electronics.
Now GM and LG have agreed to provide a $150 million relief fund to Bolt EV owners impacted by fires. The fund would resolve a class action lawsuit brought by owners for the trouble defective batteries caused them.
Here’s what GM said to Reuters this morning:
"GM, LG Energy Solution and LG Electronics have agreed to a settlement with plaintiffs to resolve class action litigation related to the Bolt EV battery recall," GM said in an emailed statement to Reuters.
"As a result, Bolt owners who received a battery replacement or who have installed the latest advanced diagnostic software may qualify for compensation," the company said.
Bolt EV owners who installed the final software remedy at GM-authorized dealerships may receive up to $1,400, according to court documents viewed by the news wire. Those who terminated their lease or already received a battery replacement would get at least $700, the report added.
GM had previously said that two rare manufacturing defects were the root cause of Bolt EV fires. As a result, half of Bolt EVs manufactured between 2017 and 2021 were recalled for battery replacements.
It’s been a steep learning curve for GM so far. First with the defective batteries, then the seemingly unending production challenges and most recently the software issues with the Blazer EV. With so many lessons learned, it’s safe to assume that GM loyalists would have high expectations from the next-generation Ultium-platform-based Bolt. It better not disappoint.
90%: Tesla Leans On Data From China To Power FSD Ambitions
Tesla has had a chaotic year, starting with disappointing Q1 sales, mass layoffs and a recall of the Cybertruck. But CEO Elon Musk broke this streak of bad news with his recent trip to China, where he brought home a win for Tesla’s Full Self-Driving ambitions.
Just last week, Tesla reached a mapping and navigation deal with Chinese tech giant Baidu and complied with Chinese regulators on how it would handle data security and privacy issues.
This means Tesla is now on the cusp of unlocking massive amounts of data to train its self-driving system. Reuters reported this morning that Musk is pushing ahead with this plan, possibly with a local data processing center.
Here’s what the news wire reported:
It was not clear if Tesla would proceed with both options for handling self-driving data from China—data transfer and a local data center—or if it was developing parallel plans as a hedge.
Setting up a data center in China for FSD development would require Tesla to work with a Chinese partner, two of the sources said. There is also a potential hardware-sourcing challenge.
Musk also discussed the possibility of Tesla licensing its FSD systems to Chinese EV makers, one person said. Musk had said in April Tesla was talking to another "major" automaker about licensing FSD without naming it.
China is Tesla's second-biggest market after the U.S. Collecting data from its congested cities and complicated traffic patterns might help it solve autonomy. It’s where investor confidence lies and is also the reason why Tesla’s market valuation is so high.
Tesla already relies on the Gigafactory Shanghai—its largest plant by manufacturing capacity—to meet global demand. This factory has been crucial in establishing Tesla as the world's leading EV manufacturer. Now, I’m curious to see if Tesla can once again turn to China, this time for a different purpose, and achieve similar success.
100%: What Do You Expect From Ford’s Upcoming Affordable EVs?
It might be a while before Ford turns a profit from its EV business. We know that it’s working on mass-market EVs that can help it achieve that goal.
Several affordable Ford models, including a $25,000 truck and compact SUV powered by low-cost LFP batteries are under development. What are your expectations from these EVs in terms of range, powertrain, and features? Share your thoughts in the comments.
Contact the author: suvrat.kothari@insideevs.com
