Although Ford Motor Company is profitable overall, its electric vehicle division is still in its infancy and requires significant investment in building new factories and purchasing raw materials. Ford announced its financial forecast today, showing that its electric vehicle division will lose $3 billion this year.
Ford was the first company in the US market to launch an electric pickup truck, as well as a medium-sized electric crossover vehicle and an electric delivery van for commercial users. However, in order to launch these products, Ford had to spin off its passenger car business. The electric vehicle division was named Ford Model e, and the internal combustion engine vehicle division was named Ford Blue, mainly to show investors and analysts that Ford is embracing electrification.
Ford CFO John Lawler said that Ford Model e should be viewed as a startup company. “It is well known that electric vehicle startups will incur losses in investment, R&D, and market share acquisition,” he said, citing Tesla, which did not turn a profit until 2021.
In fact, the Model e division has already lost money: $900 million in 2021, $2.1 billion in 2022, and an expected $3 billion in 2023. The reason is obvious: it doubled the annual production of the Mustang Mach-E to 210,000 units and tripled the annual production of the F-150 Lightning to 150,000 units. 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 divisions, Ford Blue and Ford Pro (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. Therefore, at this stage, Ford is unlikely to cut back on its ambitions for its electric vehicle business and will absorb the losses of the Model e division for the time being.
Ford said it expects Model e to achieve an 8% EBIT margin by the end of 2026, and overall, Ford will have a 10% EBIT margin at that time.
