Are Ford’s Plug-In Energi Cars Profitable?

MAR 19 2014 BY DAVID MURRAY 25

Ford Notes New $4,000 Lower Starting Price On 2014 Fusion Energi

Ford Fusion Energi – MSRP Reduced By $4,000 For 2014

We’ve often heard stories about the Chevy Volt losing money for GM. And while we don’t know for sure it is losing money, Dan Akerson did state at one point:

By Leveraging The Chevy Volt's Platform GM Is Certainly Making Money On The $75,000 Cadillac ELR (show here at the 2014 Geneva Motor Show)

By Leveraging The Chevy Volt’s Platform GM Is Certainly Making Money On The $75,000 Cadillac ELR (show here at the 2014 Geneva Motor Show)

“We aren’t making much money on them, actually any money on them.”

So at best, they are breaking even on the current generation of the Volt. Some might ask if the Volt is profitable from a standpoint that it costs less to manufacture than they sell it for. Again, I’m going to assume no profit is being made here either, simply because GM doesn’t show much interest in trying to sell more of them. Selling more would help cover that $1.2 Billion development budget for the Volt, if it were profitable. (disclosure: I own a Volt, and love it… not trying to bash it)

But what about Ford and their C-Max Energi and Fusion Energi cars? I began to think about this and come up with some math, much of it guesses. Apparently it can cost anywhere from $250 million up to billions of dollars to develop a new car.

So lets take the C-Max for a test-case. Ford appears to be selling around 40,000 C-Max cars per year at the current rate. The C-Max, being a hybrid, I’m going to guess at least $500 Million to develop. If they sell the car for 5 years they will have sold 200,000 of them. If you do the math, then they must need to include $2,500 of development cost into each unit sold. This is probably a pretty high number compared to the Fusion, which sells quite a bit more units. However, it looks fantastic compared to the Chevy Volt, which would need $12,000 per unit at its current sales volume to recoup development costs (assuming it were making any money at all).

Ford Probably Needs To Recoup About $2,500 Per C-Max Hybrid To Cover Development Costs

Ford Probably Needs To Recoup About $2,500 Per C-Max Hybrid To Cover Development Costs

Still. I’m going to make an assumption that the C-Max Hybrid is profitable for Ford, since they do actually seem to want to sell the car.

So, what about the C-Max Energi? This is where things get really interesting. Since the Energi shares the same body, same drive-train, same everything… The only development costs that would go into the Energi car above and beyond the regular C-Max hybrid would be for the new battery pack, charger, and the charge port on the side of the car. So we can assume development cost for this car is much lower than something like the Volt or Leaf. Oh and whatever the development cost is, you can divide that by two since the same system is shared with the Fusion Energi (and soon to be shared with some other Energi cars)

Ford C-Max Energi Dash

Ford C-Max Energi Dash

What about production costs? Well, much of the same applies.

The C-Max already benefits from economies of scale since it is a mass produced car. Very little is changed for the production of the Energi model and it gets assembled on the same assembly line.

The battery costs a bit more, but probably not as much as you might think. They are already using a 1.4 kWh lithium battery pack in the regular hybrid model. The Energi has a 7.6 kWh battery pack. I’m going to assume $400 per kwh (installed) at this point, which would mean the battery pack in the Energi model probably costs around $2,480 more than the regular hybrid. And that is a generous number because the cells in the standard hybrid probably cost more than $400 per Kwh since they have to be higher power density to handle hybrid operation. As for the charger and charge-port door, let be generous and say the whole car probably costs around $3,000 more to build than a regular C-Max Hybrid.

Lets look at the MSRP:

•C-Max Hybrid SE – $25,170
•C-Max Hybrid SEL – $28,455
•C-Max Energi – $32,920

Ford C-Max Energi At The 2014 Geneva Motor Show

Ford C-Max Energi At The 2014 Geneva Motor Show

The best comparison would be to the SEL model since most of the optional equipment is the same. The Energi model is $4,465 more expensive than the SEL, not too far away from my cost difference estimate. But keep in mind that most of the extra equipment car manufacturers sell you on is very profitable, hence why they like selling the higher trim levels. So we can assume the SEL is more profitable than the SE model already.

Oh.. And don’t forget CARB credits in those states that do that. This probably saves Ford another thousand or two in CARB credits for every plug-in they sell. (I don’t think anyone knows what an actual CARB credit is worth these days, I’m guessing)

So what is my conclusion? Well, assuming the C-Max hybrid is profitable to Ford, and there’s every indication that it is, then the Energi version must also be profitable.  So, why was General Motors not able to do this? Well, one simple reason is that they didn’t have any capable, high volume hybrids to begin with.

The Lack Of A Strong Hybrid At GM On The Compact Platform Has Made It More Difficult To Turn A Profit On The Chevy Volt

The Lack Of A Strong Hybrid At GM On The Compact Platform Has Made It More Difficult For GM To Turn A Profit On The Chevy Volt

Most of the hybrids GM has produced (E-assist, BAS hybrids) have been too weak to support driving the car on electric power alone. And any that were (2-mode hybrid) were not being used in any meaningful quantity or in vehicles suited to the size and cost of battery pack they would want to use. So they had to start from scratch. While that strategy did produce a superior car with no compromised trunk space and a great all-electric range, it isn’t making any money for them.

I’d also like to point out something else, in case it wasn’t obvious. There is $4,465 difference in the MSRP of the C-Max Energi, right? Well, the federal tax credit for the Energi works out to around $4,000 also. Which means there is really no reason any person who doesn’t absolutely need the full trunk space should ever buy the regular C-Max Hybrid SEL.

I have heard that Ford is being somewhat generous lately, marking down the Energi cars thousands below MSRP to sell more. However, I do not know whether this affects profitability because I do not know if they are offering similar discounts on the regular non-energi cars, and I don’t know for sure how much the CARB credits are.

It Seems Like Everyday Deep Discounts Are Bring Offered On Plug-Ins At Ford

It Seems Like Everyday Deep Discounts Are Bring Offered On Plug-Ins At Ford

So what about the Ford Dealers? We all know dealers don’t like all-electric cars because they don’t require oil-changes and the like. But The Energi cars should not have that problem. In fact, they should be no more difficult to sell than a regular gas car. They don’t even have to charge them up if they don’t want to.

But why is it important? Why should the consumer care if the car is profitable to the manufacturer or the dealer?

Well, in some cases it doesn’t matter as long as the customer likes their car and it is reliable, and came at a price they like. But for the long-term it is important that these cars make money for the people involved in making and selling them, otherwise they have no incentive to sell more of them, or innovate to make them better, or make sure that they are reliable and give a good message to the world.

For example, if a manufacture is being forced to make cars that don’t make money, they might not care if the car is unreliable. If that sends the message for customers to stay away from the car, all the better because they never wanted to sell them to begin with.

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25 Comments on "Are Ford’s Plug-In Energi Cars Profitable?"

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Interesting point about C-Max Energi pricing almost equal to the hybrid, net of the tax-credit. At 200,0000 per manufacturer, other interesting math could be done on the net cost to the taxpayer being lower because of what are evidently smaller batteries. Ford looks to be a little more than half the cost GM will be. Of course, this analysis is rounding error to a billion, versus the trillion dollar Persian Gulf costs that we know partly accrue to the use of oil.

I would put development costs for new vehicles into the “cost of doing business” bin, and only look at the material & labor to build vs. sell price.

I love my Volt, but if the Gen II doesn’t have a bigger back seat I will probably be driving a Fusion Energi in a couple years when my lease runs out.

Good article David. I have a Volt also. It is a great car. Here’s my simple math on the Volt. Cruze is around 18K. That means GM is asking 17K for their battery and the 2 mode transmission (not including any development costs). They have a profit in the cruze. They should easily be able to put in the battery and 2 mode for 17K. So GM is blowing smoke. It’s not that they don’t make any money it is that they don’t make a killing like they do on their pick ’em up trucks. Your point under the photo is well taken….and I believe it is true. Then GM’s path to profitabilility on the Volt is straight forward based on your analysis. GM needs to proliferate the Volt power train into other products. A simple tweek of the Volt’s tranny and it is a hybrid. Leave it the same and it is more Voltecs. Put the Voltec power train in one of their CUV vehicles. We found out yesterday that they are busy at work making the Volt more cost effective. We can arm chair this thing forever….but let’s see what engineering comes up with. Personally as a Volt… Read more »

The last informed article I remember reading had Nissan’s cost for a LEAF at around $70,000 or about double what they sell for. It’s one reason a Tesla costs as much as it does, without a full product line to recoup development costs they can’t afford to lose any money on them.

Nissan is on record as saying the leaf is profitable. No way a Leaf costs Nissan as much as Tesla Model S costs at retail.

See my comment above. That’s a false evaluation of how development costs are spread across the production of a new vehicle. Done likely by the right wing haters of free market.

Ford is marking their plug in hybrids down (except for the popular Fusion) because they haven’t done enough demand creation.

People have to understand how a more expensive product benefits them. Ford makes no effort to do that.

A great example is the European Focus Electric posted by CherlG a few days ago. Tells you nothing about why that car is more desirable, when in fact, The electric is a superior driving experience in almost every respect over the ICE version. Oh, and the fuel cost savings over a gas version make it a free car.

I’ve just never seen that in a Ford ad. (Or Chevy’s).

Hmm, I wonder why?

I think they are making a small profit on it while at the same time they are not losing their shirts on it. In that it’s basically a existing hybrid with a bigger battery that takes up more trunk space from it.

Personally I don’t see why some cars need to cost a billion dollars to rebuild them considering you got people in their garages building 100 mile EV’s off of existing gas cars before the main stream EV’s came out.

Hey all, You know what? I don’t give a rat’s ass whether Ford thinks it makes money on its PHEV line or not. If the future of EVs (whether BEVs or otherwise) depends on the profit-calculations of Ford, then there is no such future. It had taken a full decade after ICE hybrids have been in the market and doing very well for Toyota, for Ford to come up with its own viable line of hybrids. They are still perfectly happy raking in the dough from their F-line trucks, even as they bitch and moan that EVs and PHEVs – heavily subsidized by the government on both the production side and the sales side – are “not making enough money”. In short, in the entire green-vehicle scene Ford has long established itself as a very-late-adopter, just a sliver above a complete dead weight (that title is reserved for Chrysler). There’s a reason why Tesla looms so large. The biggest enemy of reducing oil consumption, is not oil companies but the Big Three. As of 2013, all 3 are still below 10 km/l fleet average (that’s 24 MPG). Ford is a hair less-bad than GM and Chrysler, but that’s little consolation.… Read more »

What that interview with a Ford exec shows, is that they (and apparently all the Big Three leaderships) are still employing the same profit-calculations that have led 2 of the 3 to bankruptcy in 2008-9, and Ford to the brink of bankruptcy.

You got bailed out by the government. The government wants in return to see some more efficient vehicles and new technologies.

You are making some, that’s great. Spare us the whining about your bottom line. We’ve seen how well you know to take care of that on your own.

Assaf, I think you need to re-think your position. Here’s my take . . . I needed a new car last August and I had no intention of purchasing an EV or PHEV. I am 6′ 4″ and 300 lbs. I have two large teenagers that I haul around with all of their sports equipment for long distances at times. I’m not a man-made climate change believer. With this as my background, I ended up buying a C-Max Energi and I LOVE it. When doing my research on cars, I noticed a Volt ad on Edmunds of $12.5k in incentives ($7.5k from Fed, $5k from Chevy) which peaked my interest so I did some research on the Volt. There were some really great reviews on the car but the thing I liked the most was Edmunds Total Cost to Own which was far below the ICE vehicles in the same space. So I went for a test drive of the Volt. While I liked the way it drove, it fell short in two areas: 1. Too small for 6’4″ driver (entry was difficult) 2. Total range for long trips was too short. But I liked it enough to see what… Read more »

Enjoyed the article. I would add that we should also consider that CMAX sells very well in Europe, maybe twice that of the US sales, so that helps defray development costs on non-drivetrain parts.

Also I believe much of the hybrid work for the CMAX was a development out of the Escape Hybrid.

Ford is clearly getting very good bang for their development costs on the Energi cars.

Ford could be profitable at these, but they act like they don’t want to be. Just like any old company they are too loaded with delusional old farts that care nothing for their country or it’s people. A paradigm shift requires a period of sacrifice and risk. Sacrifice in that short term profits may not be as great because of the additional capital expendatures and risk in that the market may shift to more proficient actors (Tesla). None of these old fools at ford want either to sacrifice or take a risk because they are relatively short timers and would simply prefer to gut the oprganization to pad their retiremnt accounts. That’s pretty standard old guys in business procedure and not a specific ford issue though.

+1. Except it’s not necessarily an age thing as much as a mindset thing.

The same mindset that drove Big Three into the ground only a few years ago.

By your calulation, then Prius Plugins must be making a huge profit, then why is Toyota NOT eager to sell the PIP?

Also, if energi models is Profitable (at least by the trim options), then why isn’t Ford advertise it heavily and sell it heavily?

CA Ford Dealers are marking down those Energi models like crazy. It is NOT unusual to see a discount of $5K off the sticker on C-Max Energi near the end of month….