Ford says that it is going to lose $3 billion this year as it is increasing its investments in electric vehicles. The data was revealed as new financial reports were out. Their new business structure separates electric vehicles, profitable ICE, and commercial vehicles.
According to company officials, Ford’s electric vehicle unit, named “Ford Model e,” is expected to achieve a pre-tax profit margin of 8% by the end of 2026, indicating profitability before taxes. The Chief Financial Officer, John Lawler, suggested that Model e should be treated as a startup entity within the Ford company. Lawler explained that EV startups typically incur losses as they focus on building capabilities, developing expertise, increasing sales volume, and gaining market share.
In the case of Model e, he stated that the unit is already working on the development of second and third-generation electric vehicles. Currently, the unit offers three electric vehicle models for sale in the United States, including the Mustang Mach E SUV, the F-150 Lightning pickup, and the electric Transit commercial van. Lawler further stated that the company has introduced a new corporate reporting system designed to provide investors with greater transparency compared to the previous system, which reported results by geographic regions. Over the past two calendar years, the automaker has calculated earnings for each of the three units.
EV production
During the past two years, Model e, Ford’s electric vehicle unit, reported pretax losses of $2.1 billion in 2020 and $900 million in 2021 and is projected to incur a loss of $3 billion this year. However, Ford has committed to building four new battery factories and a new vehicle assembly plant and has invested heavily in procuring raw materials to manufacture electric vehicles. The company aims to achieve an annual production rate of 600,000 electric vehicles by the end of this year and increase it to 2 million vehicles per year by the end of 2026.
Meanwhile, Ford Blue, the unit responsible for selling internal combustion and gas-electric hybrid vehicles, generated over $10 billion before taxes over the last two years. Ford Pro, the commercial vehicle unit, earned $5.9 billion during the same period, according to the company. Lawler stated that Ford Blue is expected to record a pretax profit of $7 billion this year, slightly better than the previous year, while Ford Pro is anticipated to earn $6 billion before taxes, almost double its earnings from last year. Ford presented the new structure, which was announced in March, to analysts and investors on Thursday. In addition to corporate, Ford Credit, and Ford Next, a new business incubator, the company is changing its approach to business, rather than merely conducting an accounting exercise, Lawler said.