Ford CEO Jim Farley explains why the growth of hybrid vehicles is outpacing EV sales.
The number of electric vehicles on the road is going down, which makes the business as a whole wonder if it’s spending billions of dollars wisely. Politics, the cost of cars, and the lack of charging stations have all been blamed.
These problems are important, but Jim Farley, CEO of Ford Motor Company, says that battery-electric cars (BEVs) also have to deal with other problems.
Farley told Barron’s, “We’re getting new customers, but most people aren’t willing to pay more for EVs.” “They have no idea how to fix the charging.”
Those are good points that I understand. In 2023, sales of all-electric cars went up 46%, but in the first quarter of 2024, they only went up 3%.
Prices aren’t helping either, making it harder to find people who want to go all-electric. According to Cox Automotive, the average price of a new car in the U.S. in May was $48,500, and the average price of a new BEV was $55,000.
There are about 176,000 public charging ports in the U.S. for you to use. China has fifteen times as much.
People who buy cars are also worried about other things. They don’t know how much an EV will be worth again, says Farley. “Insurance has gone up, and they don’t know how to handicap that,” he adds.
Problems with EV resale prices can be traced back to Tesla. Today, a Tesla costs about $50,000 in the U.S., which is 20% less than it did a year ago, when it cost more than $62,000. Since late 2022, the EV company has cut prices many times to help keep up with falling demand. Big drops in prices affect how much Tesla owners can get for their cars when they want to sell them.
After three years, a car should be worth about half of what it was worth. Most likely, a Tesla bought in 2021 is worth about 40% of what it was bought for.
Driving costs have gone up for everyone in the U.S., which makes people more likely to look for a good deal. It costs almost half as much to insure a car now than it did before the COVID-19 pandemic.
It’s not much better when it comes to fixing and maintaining cars. The average cost of repairs is almost 40% higher than it was before the pandemic.
EVs are easier to keep than regular cars because they don’t need oil changes or as many moving parts. However, they are a bit more expensive to fix when compared to regular cars. Remember that most EVs are high-end cars, so people shouldn’t compare how much it costs to fix, say, a Lexus to how much it costs to fix a Corolla.
Another thing that affects repair costs is the amount of EVs on the road. When there are fewer EVs, there are fewer aftermarket parts available.
It can be scary to switch to electric cars. Farley says that people who want to buy a car can “do the math on a hybrid…they can figure out how much money they can save on gas.” “The number of hybrids we can make is too high for us to keep up.”
Ford sold about 74,000 hybrids in the U.S. through May, which is about 51% more than the same time last year. In the U.S., sales of hybrid cars went up about 65% in the first quarter. This was after going up 56% year over year in 2023.
Ford’s plan is to let customers choose between regular cars, hybrid cars, and all-electric cars. Farley also thinks that BEV sales will go up in the future as models get cheaper and people get used to them.
BEVs will also need to be easy to fix and keep their value. The EV industry can work on these two problems to boost sales of all-electric cars.
So far this year, Ford stock had been flat, which means it had done about 12% worse than the S&P 500.
Ford stock is only worth 6.3 times what it is expected to earn in 2025. The S&P 500 is worth about 19.3 times its value. Investors don’t usually give traditional car companies high value multiples. One reason for this is that they don’t know how sales of hybrid, electric, and traditional cars will grow.
