Ford's electric vehicle unit loses $3 bn, should be seen as startup

Ford Motor Co.'s electric vehicle business has lost USD 3 billion before taxes during the past two years and will lose a similar amount this year as the company invests heavily in the new technology.

The figures were released on Thursday as Ford rolled out a new way of reporting financial results.

The new business structure separates electric vehicles, the profitable internal combustion and commercial vehicle operations into three operating units.

Company officials said the electric vehicle unit, called Ford Model e, will be profitable before taxes by late 2026 with an 8 per cent pretax profit margin. But they wouldn't say exactly when it's expected to start making money.

 

Chief Financial Officer John Lawler said Model e should be viewed as a startup company within Ford.

As everyone knows, EV startups lose money while they invest in capability, develop knowledge, build (sales) volume and gain (market) share, he said.

Model e, he said, is working on second- and even third-generation electric vehicles. It currently offers three EVs for sale in the US: the Mustang Mach E SUV, the F-150 Lightning pickup and an electric Transit commercial van.

The new corporate reporting system, Lawler said, is designed to give investors more transparency than the old system of reporting results by geographic regions. The automaker calculated earnings for each of the three units during the past two calendar years.

Model e had pretax losses of USD 900 million in 2021 and USD 2.1 billion last year, and it is expected to lose $3 billion this year. In the past two years Ford has announced it would build four new battery factories and a new vehicle assembly plant as well as spending heavily to acquire raw materials to build electric vehicles.

By the end of this year, the company based in Dearborn, Michigan, expects to be building electric vehicles at a rate of 600,000 per year, reaching a rate of 2 million per year by the end of 2026.

Ford Blue, the unit that sells internal combustion and gas-electric hybrid vehicles, made just over USD 10 billion before taxes during the last two years. Ford Pro, the commercial vehicle unit, made USD 5.9 billion during those years, the company said.

For this year, Ford expects Ford Blue to post a USD 7 billion pretax profit, modestly better than last year. Ford Pro is expected to earn USD 6 billion before taxes, nearly double its earnings last year, Lawler said.

Ford was to present the new structure, announced last March, to analysts and investors on Thursday. Other business units include corporate, Ford Credit and Ford Next, a new business incubator.

Lawler said the company is changing the way it does business, not just doing an accounting exercise.

After 120 years, we've essentially re-founded Ford, he said. We're embracing technology and competitive disruption in our industry, fundamentally changing how we're thinking, how we're making decisions, and how we're running the company.