How can Ford turn its projection of a $3 billion (£2.5bn) loss on EVs this year into big enough gains to reach a promised 8% profit margin by 2026?
Ford last week split out its EV revenue and profits for the first time as part of restructuring its business into three different entities: Ford Blue for ICE vehicles, Ford Model E for EVs and Ford Pro for business sales of vans and cars.
Investors and analysts were able to peer under the bonnet of the EV side of Ford’s business for the first time, and it wasn’t pretty.
Last year, Ford made a $2.1bn (£1.7bn) loss selling EVs such as the Mustang Mach-E SUV, F-150 Lightning pick-up truck and E-Transit van. This year, that will creep up to $3bn (£2.5bn).
But Ford also gave analysts an idea of how it will turn around that loss and create a business that will eventually surpass the margins of Ford Blue, which last year made a profit of $6.8bn (£5.5bn) with a margin of 7.2%.
For one thing, Ford pointed out, much of that loss came from the fact the company is pouring in money developing the second and third generation of EVs. Parallels were made with Silicon Valley tech companies and their huge capital requirements in early-stage development.
“Model E is functioning like a start-up, untethered from legacy operations,” Ford chief financial officer John Lawler said in the presentation to investors.
Ford is currently going through a steep learning curve with the likes of the Mach-E, which it said was informing the development of its next round of EVs. “As velocity of this business accelerates, we have a flywheel effect,” Lawler said. “This puts us ahead of those only just coming to market with their portfolio of first-generation models."
Ford’s speed in launching the Mach-E, F-150 Lightning and E-Transit has actually been part of the problem. “We moved quickly on these vehicles because we wanted to be first to market. They’re basically ICE designs converted to BEVs,” Lawler said.
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