The EV losses will mount as the company expects increased profits for its internal combustion and commercial vehicle businesses.
DETROIT — Ford Motor Co. expects its electric vehicle business to lose $3 billion this year, even as it forecasts increased profits on its internal combustion and commercial vehicle operations.
The automaker on Thursday projected that losses from its EV unit, called Model e, will increase nearly 50 percent in 2023 from $2.1 billion last year as it continues to invest in boosting production and developing next-generation products on a dedicated EV platform. Ford said it expects about $7 billion in earnings before interest and taxes this year for Ford Blue, its internal combustion business unit, and about $6 billion for Ford Pro, its commercial unit.
Those units made $6.8 billion in 2022 and $3.2 billion in 2022, respectively. Overall, the company posted adjusted EBIT of $10.4 billion and $2 billion net loss.
In 2022, the Ford Blue business made a 7.2 percent profit margin on external revenue of $94.7 billion, while Ford Pro made a 6.6 percent margin on external revenue of $48.9 billion.
The 2022 loss on its Model e business equates to a margin of negative 40.6 percent, Ford said, while it posted external revenue of 5.25 billion. In a presentation to investors, Lawler said that by 2024, the company’s first-gen EVs will be EBIT margin positive.
Analysts and investors have long assumed the company's traditional gasoline-powered vehicle business has driven profits and helped fund investments in EVs and other mobility ventures.
But Thursday marked the first time Ford has publicly broken out results for the three units, created as part of a companywide reorganization in 2022, as it changes its financial reporting method. The new way of reporting no longer details how the company did in different regions of the world, such as North America, Europe and China.
"By changing our organization and how we're reporting financial results, we're operating with increased focus, speed and accountability," CFO John Lawler said in a call with reporters.
Ford on Thursday reaffirmed 2023 full-year targets of $9 billion to $11 billion in adjusted EBIT and about $6 billion in adjusted free cash flow. It also said it remains confident in its projections that EBIT margins would be 8 percent for Model e and 10 percent companywide by late 2026.
Lawler, speaking to reporters, said near-term EV losses are to be expected.
"Ford Model e is an EV startup within Ford," he said. "As everyone knows, EV startups lose money while they invest in capabilities, develop knowledge, build volume and gain share."
The losses are expected to increase this year because of the money being spent to build manufacturing complexes in Tennessee and Kentucky and to offer alternative battery chemistries, he said.
Still, Lawler said Ford would be "approaching contribution margin breakeven" on EVs by the end of this year. The automaker expects to reach production capacity of 600,000 EVs annually by the end of this year and be able to build 2 million a year by 2026.
To get to its 8 percent margins by the end of 2026, Lawler said the company will rely on a number of business operation improvements.
He said scaling volume will account for 20 points of margin; design and engineering will account for 15 points of margin; and vertically-integrating battery production will add another 10 points of margin. Additional business improvements will add another 3 points of margin, Lawler said.
He said he was confident the company could reach its targets in part because of recent hires like Doug Field and Alan Clarke, who previously worked at Tesla.
“It’s about the talent we have,” Lawler said. “We all know there is one profitable EV manufacturer. The folks that designed those vehicles are at Ford.”
Lawler said the Ford Pro unit is expected to nearly double its earnings this year as it prepares to launch a new Super Duty line of pickups and boost output of its E-Transit van.
"Ford Blue and Ford Pro are both solidly profitable today and well-positioned for growth," Lawler said.
Source:Automotive News
