Mar 23, 2023 - Economy

Gas-powered vehicles are paying for their own funeral

Illustration of an electric vehicle plugged in, the charging wire has dollar bill signs running inside of it towards the car.

Illustration: Aïda Amer/Axios

Gas-powered cars, trucks and SUVs are still paying the bills for automakers as they pile money into electric vehicles.

Why it matters: EVs are the future, but getting to that future will be expensive.

Driving the news: Ford revealed Thursday that it expects to lose $3 billion in its electric vehicle division in 2023, despite early sales success for the F-150 Lightning and Mustang Mach-E EVs.

  • But Ford expects to turn an overall profit before interest, taxes and depreciation of $9 billion to $11 billion for the year.
  • The company is one of the only automakers that separates its EV operations from the rest of its business for financial reporting purposes.

State of play: "It’s a big number, but I suspect if you took the other automakers and pulled out the EV business you’d find it to be similar," Autotrader analyst Michelle Krebs tells Axios.

  • EVs currently account for only about 6% of sales, though they are growing quickly, she said.
  • "We believe no U.S. automaker is making EVs profitably aside from Tesla," CFRA Research analyst Garrett Nelson writes, adding that "EVs are likely to be a material drag on near- and intermediate-term earnings."

Automakers are using the proceeds from profit beasts like the F-150, the Ram 1500, the Chevrolet Silverado and the Toyota RAV-4 to pay for the costs of the transition.

  • "They’re plowing in lots of R&D — they’re spending big on new battery plants, new assembly plants," Krebs says.

The intrigue: Gas-powered vehicles are disappearing despite their money-making ways.

  • The latest casualty of the race to EVs is the Chevrolet Camaro, which General Motors is discontinuing in its current form, Automotive News reported.
  • Several automakers have committed to a goal of selling all or mostly EVs within a matter of years.

Yes, but: Automakers have little choice with investors and regulators demanding the switch.

  • California is leading the way by phasing out the sale of gas-powered vehicles by 2035, while several other states are expected to follow suit.

The bottom line: Gas-powered vehicles are paying for their own funeral.

(Disclosure: Autotrader is owned by Cox Enterprises, which owns Axios.)

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