Ford to lose $3B on EV 'startup' in 2023, turn profit on traditional vehicles
Ford announced on Thursday that it is expecting profits of $9 billion to $11 billion in 2023, mainly driven by its conventional vehicle and commercial operations. However, the company is forecasting a significant loss in its Model e electric vehicle division, estimating a loss of $3 billion due to investments focused on increasing the production of electric vehicles. The automaker plans to achieve an annual production rate of 600,000 electric vehicles globally by the end of 2023 and two million by 2026, in order to compete with Tesla and GM.
Ford's CFO, John Lawler, described Model e as an "EV startup within Ford." Lawler also explained that EV startups typically lose money during their initial investment phase while developing capabilities, building volume, and gaining market share. The Model e electric vehicle division has already lost $2.1 billion in 2022, with a cumulative loss projected to reach $6 billion from 2021 to 2023.
Meanwhile, Ford's Blue division, which focuses on internal combustion engine and hybrid vehicles, is expected to earn $7 billion this year, up from $6.8 billion in 2022, while the Ford Pro commercial services division aims to double its growth from $3.2 billion to $6 billion.
Ford has set a margin target of 10% for its overall operations in 2026, with Model e at 8%. The company plans to increase production of six key models, including the Maverick compact pickup, Bronco Sport SUV, Transit vans, electric Mustang Mach-E, and F-150 Lightning, as supply chain issues ease up.
Ford also recently revealed an all-electric Explorer SUV that will be produced in Germany for European sales, utilizing technology developed by Volkswagen. Lawler stated that Ford will continue to report financial results by division rather than region, as that is how the company is now operating. While Ford's shares have remained relatively stable this year, the S&P 500 has gained 2%.