Building cars is hard; like, really hard. There are safety, fuel economy, and emissions regulations to meet, vehicles have to offer all the latest and greatest features to remain competitive with rivals, versatility is critical, too, as is styling, and reliability. It’s not easy designing, engineering, manufacturing, and selling new cars and trucks, and all of this is doubly difficult with electric vehicles, as many manufacturers are learning.
How To Make A Small Fortune In The EV Business: Start With A Large Fortune
It’s not that making EVs is necessarily more difficult than combustion-powered models, but doing so profitably is a huge issue. Which global car companies are actually making money selling electric vehicles? Analytics firm Rho Motion recently published an article exploring this topic. Reportedly, only four EV manufacturers are operating at a profit, just four! This includes Tesla, BYD, Li Auto, and the Seres Group.
Leading the pack, Tesla is the most profitable electric vehicle manufacturer. Last year, the Texas-based firm had an operating margin of 7.2 percent. Gigantic Chinese firm BYD is not far off this benchmark, though, at 6.4 percent. As Rho Motion points out, the operating margins of both these companies are moving in opposite directions: Tesla’s has declined since 2023 while BYD’s is increasing.
Aside from these two success stories, PLENTY of other electric vehicle brands are losing money. In China, Zeekr, Leapmotor, Xpeng, and Nio are all in the red. Of this group, Zeekr is the closest to breaking even – or maybe even turning a profit – with an operating margin of -8.5 percent.
- 2024 Tesla Operating Margin: 7.2 percent
- 2024 BYD Operating Margin: 6.4 percent
- 2024 Zeekr Operating Margin: -8.5 percent
- 2024 Lucid Operating Margin: -374
Like those Chinese brands, other international companies including Polestar, Rivian, Vinfast, and Lucid have yet to turn a profit. Sadly, the worst of this bunch is, by far, Lucid. The brand’s 2024 operating margin was -374 percent, yes, -374 percent. Believe it or not, this financial performance is a huge improvement, because the brand’s operating margin was -500 percent in 2023.
Challenges And Opportunities
Clearly, there are huge issues facing EV manufacturers, but what will it take for them to actually make money? Slowly but surely, things are moving in the right direction, but as Rho Motion reports, the key here is scale. According to the firm, “Every company with a negative operating margin in 2024 experienced higher sales compared to 2023. If this trend continues, brands such as Zeekr, Leapmotor, and Xpeng are likely to reach profitability in the near future.” Given its staggering financial losses, Lucid profitability will likely be much farther off, even though the Air sedan and upcoming Gravity SUV are extremely compelling products.
Now, the good news is that last year around 17 million electric vehicles were sold globally. That showroom performance represents an increase of 25 percent compared to 2023, a huge jump. Of course, certain markets – like China – have embraced EVs much more rapidly than others – including the U.S. The good news her is that electric vehicle sales are moving in the right direction, and they could soon hit a critical mass that puts profitability within the reach of many automakers, not just Tesla and BYD.
Read the full article here