Ford Motor Co.’s electric vehicle (EV) business has lost $3 billion before taxes during the past two years and is expected to lose a similar amount this year, but the automaker is undaunted, and executives say that its EV unit should be seen as a startup company within Ford.
“EV startups lose money while they invest in capability, develop knowledge, build (sales) volume and gain (market) share,” John Lawler, Ford’s chief financial officer, told investors and analysts Thursday. He said that the company expects Model e to be profitable before taxes by late 2026, with an 8% pretax profit margin, but he didn’t specify when it will start making money.
Ford’s new business structure separates EVs, the profitable internal combustion, and commercial vehicle operations into three operating units. The Model e unit offers three EVs for sale in the US: the Mustang Mach E SUV, the F-150 Lightning pickup, and an electric Transit commercial van.
New Corporate Reporting System
The new corporate reporting system, Lawler said, is designed to give investors more transparency than the old system of reporting results by geographic regions. During the previous two calendar years, the automaker computed the profits for all three of its units.
Ford’s Model E recorded pre-tax losses of $900 million in 2021 and $2.1 billion in the previous year, with a projected loss of $3 billion for the current year. Despite these losses, Ford has announced plans to construct four additional battery factories and a new vehicle assembly plant, as well as investing heavily in procuring raw materials for electric vehicle production over the past two years.
By the end of this year, the company expects to be building EVs at a rate of 600,000 per year, reaching a rate of 2 million per year by the end of 2026. Despite the current losses, Ford’s executives say they are confident about the future of its EV unit as it is making significant investments to ensure long-term success.
One of the major factors that give Ford confidence is the growing demand for EVs globally. According to research firm IHS Markit, global EV sales are expected to reach 60 million units by 2040, up from 4.7 million in 2020. As more consumers switch to EVs, automakers that invest in the technology now are likely to reap the rewards in the long run.
Ford is also banking on its experience in manufacturing, distribution, and customer service to give it a competitive edge in the EV market. The company has been building cars for more than a century and has a vast network of dealerships around the world. Ford hopes to leverage these strengths to build a loyal customer base for its EVs.
Another key advantage that Ford has is its commitment to sustainability. The company has set ambitious targets to reduce its carbon footprint, and it plans to become carbon neutral by 2050. As part of this effort, it is investing in renewable energy, recycling, and other green technologies. This commitment to sustainability is likely to resonate with consumers who are increasingly conscious of the impact of their buying decisions on the environment.
Ford’s EV unit may be losing money now, but the company sees it as a long-term investment in the future. By investing in EVs, Ford is positioning itself to capitalize on the growing demand for electric vehicles globally. With its manufacturing expertise, distribution network, and commitment to sustainability, the company is well-positioned to succeed in the EV market in the coming years.
