Ford Motor Co’s electric vehicle (EV) business lost US$3 billion before taxes over the past two years and is set to lose a similar amount this year as the company invests heavily in the new technology, the company said on Thursday.
The figures were released as Ford rolled out a new method of reporting financial results. The new business structure separates EVs, the profitable internal combustion and commercial vehicle operations into three operating units.
The EV unit, called “Ford Model e,” would be profitable before taxes by the end of 2026, with an 8 percent pretax profit margin, company officials said, without specifying exactly when it is expected to begin earning profits.
Photo: Bloomberg
Ford chief financial officer John Lawler said Model e should be viewed as a start-up company within Ford.
“As everyone knows, EV start-ups lose money while they invest in capability, develop knowledge, build [sales] volume and gain [market] share,” he said.
Model e is working on second and even third-generation electric vehicles, he said.
It offers three EVs in the US market — the Mustang Mach E sports utility vehicle, the F-150 Lightning pickup and the electric Transit commercial van.
The new corporate reporting system is designed to provide investors more transparency than the old system of reporting results by regions, Lawler said.
The automaker calculated earnings for each of the three units during the past two calendar years.
Model e had pretax losses of US$900 million in 2021 and US$2.1 billion last year, and it is expected to lose US$3 billion this year.
In the past two years, Ford had said it would build four new battery factories and a new vehicle assembly plant, while spending heavily to acquire raw materials to build electric vehicles.
By the end of this year, the Michigan-based 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.
Last year, the pretax profit margin for Model e was minus-40 percent, Lawler said.
To reach a positive 8 percent by the end of 2026, the company expects economies of scale — spreading costs over more vehicles sold — to be worth 20 points of the improvement. Design and engineering improvements are to bring 15 points, battery cost reductions 10 points and 3 points are to come from other areas including federal tax incentives and raw material price reductions.
Wells Fargo analyst Colin Langan said that Ford would need US$15,000 in cost savings per vehicle to reach an 8 percent profit margin.
“It just seems like quite a big number,” he said, questioning Ford’s confidence.
Lawler said that Ford is looking at a new way of designing vehicles, focusing on energy efficiency, including aerodynamics.
“Every decision is about optimizing energy efficiency so that we can get the smallest battery possible to hit the range target that we have for that vehicle,” he said.
Ford also plans to simplify its manufacturing process, maximizing common parts in its next generation of EVs, saving over the current generation of repurposed internal combustion vehicle underpinnings.
“There is a significant amount of opportunity in there to identify efficiencies and drive those home,” Lawler said.
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