Ford’s losses from electric vehicles keep piling up
• Carmaker predicts red ink of $3bn on EVs this year, but the rest of business to remain strong
Ford Motor predicts that losses in its electric vehicle (EV) business will grow to $3bn in 2023 as it spends big on new models and factories. The deficit matches its accumulated EV losses over the past two years.
The vehicle maker issued guidance on Thursday for its EV unit as well as the performance of its traditional internal combustion engine and commercial operations as it moves to begin reporting financial results by business unit rather than region.
The company is keeping its profit forecast for the current year unchanged.
Ford also restated its results for the last two years, showing its nascent EV business lost $2.1bn in 2022, before interest and taxes, and $900m in 2021 on that basis.
CEO Jim Farley is radically reorganising the 120-year-old vehicle maker by cleaving it into three units: one for EVs dubbed Model e; another for internal combustion engine vehicles called Ford Blue; and a third for commercial trucks and vans known as Ford Pro.
Ford is the number two seller of EVs in the US on the strength of its F-150 Lightning plug-in pickup and battery-powered Mustang Mach-E.
But it is miles behind Tesla, which controls two-thirds of the EV market in the US.
Farley’s aim is to take on Tesla and eventually surpass Elon Musk’s company, which is the world’s most valuable vehicle maker. Ford is investing $50bn to develop and build EVs to 2026 and has set a goal of manufacturing 2-million of the battery-powered models a year by then.
NEW FACTORIES
EV losses will grow 43% this year as Ford spends heavily to develop a second generation of battery-powered models and invests billions in new factories to produce them, CFO John Lawler told reporters in a briefing. “There’s a lot of investment that’s going into Model e for the growth that we’ll be seeing,” Lawler said.
Ford reiterated its goal to reach an 8% margin before interest and taxes on EVs by late 2026. In 2022, EVs generated a negative 40% margin by that yardstick, which is known as ebit, Lawler said. But by the end of this year, Ford’s EV business will be “approaching break even” on a contribution margin basis, which excludes research & development costs.
Ford was set to walk analysts through its plan to erase losses and begin turning a profit on EVs by 2026 at a “teach-in” later on Thursday at the New York Stock Exchange. The road to profitability will come from increased sales volume, more efficient designs, lower battery costs and more competitive distribution and pricing, Lawler said.
Ford’s EV losses last year were less than Deutsche Bank analyst Emmanuel Rosner expected. He wrote in a March 20 note that Ford was likely to have generated operating losses of $6bn for the Model e unit in 2022 when factoring in significant research & development costs.
Ford’s EV losses are more than made up for by profits from traditional vehicles such as the top-selling F-Series pickups and Bronco sport utility vehicle. The Ford Blue business had $6.8bn in ebit last year, according to the restated results.
Ford this year projects its internal combustion engine vehicles will generate about $7bn in earnings before interest and taxes, which it characterised as a “modest improvement”. Farley has been critical of the performance of its traditional operations and is targeting $2.5bn in cost cuts this year.
PENT-UP DEMAND
Ford’s commercial business this year is expected to nearly double its earnings before interest and taxes to almost $6bn, the company projected. Last year, Ford Pro had ebit of $3.2bn, up from $2.7bn in 2021. Ford Pro “is scaling and growing”, Lawler said, noting the launch of a new Transit van this year. “There’s incredible pent-up demand in the commercial business.”
The company reiterated its full-year guidance of between $9bn and $11bn in adjusted ebit. However, shares have been under pressure after back-toback quarters of disappointing earnings.
Farley is counting on his company-wide overhaul to reinvigorate and refocus Ford.
“This is far more than an accounting exercise,” Lawler said. “After 120 years, we’ve essentially refounded Ford.”
FORD’S ELECTRIC VEHICLE LOSSES ARE MORE THAN MADE UP FOR BY PROFITS FROM TRADITIONAL VEHICLES