On March 23, Ford Motor Company announced its financial forecast, which showed that its electric vehicle department is expected to lose $3 billion this year. Although Ford is profitable overall, its electric vehicle department is still in its early stages and requires a significant investment in building new factories and purchasing raw materials.
According to Tech Universus, Ford was the first company in the US market to launch an electric pickup truck, and it also has a medium-sized electric crossover vehicle and an electric commercial vehicle. However, to launch these products, Ford had to spin off its passenger car business. The electric vehicle department was named Ford Model e, and the internal combustion engine vehicle department was named Ford Blue, primarily to show investors and analysts that Ford is embracing electrification.
John Lawler, Ford’s CFO, said that Ford Model e should be viewed as a startup company, “as we all know, electric vehicle startups typically lose money when it comes to investment, R&D, and market share acquisition.” He said, like Tesla, which didn’t turn a profit until 2021.
In fact, the Model e department has already been losing money: $900 million in 2021, $2.1 billion in 2022, and an expected $3 billion in 2023. The reason is obvious: it has doubled the annual production of the Mustang Mach-E to 210,000 and tripled the annual production of the F-150 Lightning to 150,000. In addition, Ford is building a battery development center in Michigan and battery factories in Kentucky, Tennessee, and Michigan, and has signed contracts for minerals needed for 600,000 electric vehicles per year.
However, the other two departments, Ford Blue and Ford Pro (which are responsible for commercial vehicles and services), are expected to generate enough cash flow to achieve pre-tax profits of $9 billion to $11 billion and free cash flow of $6 billion, respectively. Therefore, at this stage, Ford is unlikely to scale back its ambition in the electric vehicle business, but rather absorb the losses of the Model e department for the time being.
Ford stated that it expects Model e to achieve an 8% pre-tax profit margin by the end of 2026, and overall, Ford will have a 10% pre-tax profit margin at that time.
