Ford’s EV Ambitions: $3 Billion Loss is a Temporary Setback


This week, automaker Ford Motor Co. divulged restructuring agreements which will shine the 119-year-old company in a new light – with operations and financials being paraded transparently to the business industry, earmarking a detailed road map of how Ford EV plans to become an auto industry leader in the future. 

In November 2022, the total sales of Ford cars in the U.S. decreased by a staggering 8 percent, owing to strong demand inverse to limited supply. In the aspect of all-electric Ford vehicles, the company had doubled its sales year-over-year, noting that Ford EV sales were swiftly expanding. Below Tesla, the automaker is America’s top-selling manufacturer of Ford EVs. 

Ford’s push into the EV industry is proliferating on the seeds of success sown through selling Ford cars, SUVs, and internal combustion engine-powered trucks. The business model re-segmentation of Ford was trisected into:

Ford Blue, for internal combustion vehicles and hybrids; Ford Pro, for the commercial Ford auto; Ford Model e, for all the electric Ford cars, digital services and advanced driver assistance systems.

Ford EV
The automaker sells cars and commercial vehicles under the Ford brand, and luxury cars under its Lincoln luxury brand. Image Courtesy – Ford.

Auto analysts had projected concerns for Ford EV’s potential losses, which was confirmed in the reports of the automaker, available to the auto industry now. Model e, Ford’s electric cars business unit is in dire straits, expecting a steep decline – with a loss of $3 billion in 2023.

A proforma loss of $2.1 billion last year adding to the cumulative loss of $6 billion from 2021 through 2023, contradicts the forecasts of $7 billion in earnings pre-tax for the combustion Ford cars unit and $6 billion for the commercial Ford autos.  

Yet, Ford optimistically promises to achieve pre-tax margins of 8 percent on Ford EVs by the latter half of 2026, with an overall profit margin of 10 percent. The automaker is anticipating the first generation of Electric Ford cars, including the F150 Lightning and Mustang Mach E to have operating profit margins by the end of 2024. 

Ford restated its earnings for 2021 and 2022  in the briefing for auto analysts and Ford investors to expel the details of the automaker’s financial report format. The segments of Blue and Pro were profitable enough to offset the incurred losses of manufacturing Ford electric cars and the company predicted the costs of batteries and manufacturing, dwindling. 

“Ford Blue and Pro are well-positioned for growth and strong profitability today.” 

Ford Blue increased its profit margin to 7.2 percent by delivering revenue of $94.7 billion and a profit of $6.8 billion in 2022, while the commercial unit of Ford Pro made a revenue of $48.9 billion with a profit of $3.2 billion and a margin of 6.6 percent. 

The Tribulations Of Ford Electric Cars

Principal automotive analyst at S&P Global Mobility, Stephanie Brinley told the industry to not fret over the beleaguered Ford EVs, stating that Tesla took a long time to make money. 

“The transition to electric vehicles is undoubtedly going to be expensive. No matter the time taken to catch up to profitability, Ford’s way of reporting finances provides a visible picture of how they will handle it.”

Ford EV
Image Courtesy – Ford.

The company has now become fixated on disclosing financial reports by way of business units, in contrast with the prior scheme of region-wise financials. 

Executives of Ford EV expect the loss roster to hike nearly by 43 percent this year, accrediting hefty investments lauded to the production of present-gen models and development of the next-gen Ford electric cars. The company had to furlough employees in order to focus on Ford’s EV segment.

Ford’s Optimistic Prerogative

The automaker’s CFO John Lawler considers the Ford Model e’s segment as an EV startup within the company. 

“Everyone is aware that EV startups lose money, owing to investment in capabilities, developing knowledge, and building volume and share.”

Lawler stated his confidence in surmising targets because of the latest additions to their executive teams of Doug Field and Alan Clarke, of previous employment at Tesla. Ford’s EV Dream for Europe is to launch seven new vehicles by the end of 2024.

Ford EV
In an attempt of electric car crossovers with VW, Ford’s latest e-SUV is called the Explorer. Image Courtesy – Ford.

After revealing the machinations behind the restructuring, Ford announced to continue to invest deftly into the Model e business unit with plans of its $5.6 billion BlueOval City plant in Memphis, Tennessee capacitating of producing 500,000 next-gen electric pickups and trucks, under the hood of Project T3 in 2025. The automaker also aims to lower the costs of the EV battery by repurposing and producing new component combinations. 

Of the factors trailing behind the increase in the percentage of auto-aficionados to 24 percent, who are ‘very likely’ to consider electric cars for their next purchase, the primary reason is the introduction of new electric models such as pickup trucks – a largely untapped segment.

The post Ford’s EV Ambitions: $3 Billion Loss is a Temporary Setback appeared first on Industry Leaders Magazine.


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