Ford forecasts electric vehicle division will lose $3bn this year

Ford said it expected to lose $3bn making electric vehicles this year, as it gave investors their clearest look yet at the outlook for the company’s nascent battery-powered car and truck business.

The EV business, known as Model e, reported a $900mn loss in 2021 which rose to $2.1bn in 2022 as it accelerated production of models such as the Mustang Mach-E.

“Ford Model e is an EV start-up within Ford and, as everyone knows, EV start-ups lose money while they invest in capability, develop knowledge, build volume and gain share,” said Ford’s chief financial officer John Lawler.

The Michigan carmaker released recast financials on Thursday based on new business units that it announced last year. The company is now reporting profits and losses in three categories: cars and trucks powered by internal combustion, vehicles powered by batteries, and commercial vehicles.

The financials, which Ford plans to explain on Thursday in a “teach-in” for investors, are meant to convey a more detailed view of the carmaker’s costs and revenues to produce EVs as it pursues a goal of selling only zero-emission vehicles by 2040.

The new structure also gives more detail on Ford Blue, the traditional-engine vehicle division that will fund the company’s transition to clean energy vehicles.

Ford Blue will earn $7bn before interest and tax this year, the company said, compared with $6.8bn last year. Profit at the company’s commercial vehicle business, Ford Pro, is projected to nearly double this year to almost $6bn.

Ford’s EV sales place it a distant second behind electric-car maker Tesla, which had two-thirds of the US market last year. The Texas company led by Elon Musk reported net income of $12.6bn in 2022, an increase of 123 per cent from the year before. Tesla lost money for a decade before reporting its first quarterly profit in 2013.

Ford’s losses in the Model e business stem from spending on projects such as building new assembly and battery plants in Tennessee and Kentucky, as well as adding a new type of battery technology, Lawler said.

Ford plans to manufacture 2mn EVs a year by the end of 2026, hitting an operating profit margin of 8 per cent for the division. The target for the company as a whole is 10 per cent.

As the company tries to convert its EV losses into profits in three years, investors are interested in “knowing how that path looks”, said Stephen Brown, analyst at Fitch Ratings.

Lawler said the company would clear that hurdle through a combination of building production, competitive pricing and changes to the design and engineering of the company’s second generation of EVs.

Still, Ford’s target is “especially optimistic” when compared with rival Detroit carmaker General Motors, which has forecast that in 2026 its EVs will have an operating profit margin no higher than the mid-single digits, said Emmanuel Rosner, analyst at Deutsche Bank.

“While investors are broadly anticipating deep EV losses and believe this is the trough, we wonder if . . . management may have to dial back its midterm margin targets or push out their timeline,” he said.

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