The Blue Oval still has a lot of spending to do before its ‘Model e’ EV unit becomes profitable
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5 hours ago
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by Sebastien Bell
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Investments in Ford’s second-generation of new energy vehicles will mean that its electric vehicle unit, Model e, will lose about $3 billion more than it makes in 2023, the automaker said today.
Those losses are more than made up for by its two other divisions, Ford Blue and Ford Pro, which handle its combustion vehicles and commercial vehicles, respectively. However, the automaker was clear that EVs have so far not been profitable for it.
In addition to losing $3 billion this year, Ford’s electric ambitions lost it $2.1 billion in 2022, and $900 million in 2021. That spending has helped it become the second-biggest EV manufacturer in America, though.
In its pursuit of Tesla (the biggest), Ford plans to spend a total of $50 billion through 2026 to develop and build electric vehicles, reports Bloomberg. By that time, it has set itself the goal of manufacturing 2 million EVs per year.
Read: Ford Splits Up ICE And EV Divisions Into ‘Ford Blue’ And ‘Ford Model e’
As a result, Ford expects Model e to reach an operating margin of 8 percent (before taxes and interest) in 2026. That compares very well to 2022, when its margin was negative 40 percent, and brings it more in line with the rest of the company, whose margin is expected to be 10 percent in three years.
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Although it may seem like it has a very long way to go, Ford says it’s not as far off as it may seem. Despite losses of $3 billion in 2023, it claims that if you ignore research and development costs, its EVs will be “approaching breakeven” by the end of this year.
Ford plans to explain its plan for future profitability to investors at a “teach-in” at the New York Stock Exchange today. It will also lay out how the money it spends between now and 2026 will go towards creating more efficient designs, lowering battery costs, increasing sales volume, and making its distribution network more competitive, according to Chief Financial Officer John Lawler.
In the meantime, Ford is planning $2.5 billion in cost cuts for its internal combustion business, which it expects to generate $7 billion in 2023. Its commercial vehicle business (which is set to benefit from Model e’s R&D expenditures) is also expected to contribute to making the automaker profitable, with a projected $6 billion in earnings before taxes and interest. In all, it expects to earn $9-$11 billion in 2023, even despite its costly EV division.
