Ford expects to have 2023 along the same lines, with adjusted earnings of $7 billion for its internal combustion unit and $6 billion for its fleet businesses
Ford Motors on Thursday announced that its electric vehicle unit, the Ford Model e will incur a loss of nearly $3 billion in 2023. The company also announced a loss of $2.1 billion in the past year on an operational basis and this loss was compensated by the $10 billion in operating profit through its fleet businesses and internal combustion. On the brighter side, the company expects solid ground and forecasts that its electric vehicle unit will turn profitable by the end of 2026. The company expects to have 2023 along the same lines, with adjusted earnings of $7 billion for its internal combustion unit and $6 billion for its fleet businesses.
These recent announcements will be the first detailed look at the unit profitability as Ford reveals a new financial reporting structure that aims to give Wall Street a better understanding of the development of its electric business along with providing clarity on how the profits from the internal combustion business are backing its electric transformation, reports CNBC.
The new changes in the report showcase a drastic reformation that the company announced in March 2022, which divided Ford’s business into five units which are: ‘Ford Model e’, the company’s electric vehicle unit; ‘Ford pro’ which is its government and commercial fleet business; ‘Ford Blue’, the firm’s old-style internal combustion engine business; ‘Ford Next’ which is the company’s nonautomotive and the already existing Ford Credit financial service subsidiary.
The company on Thursday also provided the financial results of the past two years in accordance with the new format to give an analysis or comparison. The Model e losses have doubled compared to the results of 2021 as the company focuses on gearing up electric vehicle production. The Detroit auto manufacturer also announced that it expects to build electronic vehicles at a rate of 2 million in a year by the end of 2026. Before the reorganization was announced, several analysts had encouraged the firm to spin off its EV business.
The company hopes that the new financial reporting structure will help analysts and experts understand the significance of its internal combustion business. The automaker, however, expects and works toward having a positive EBIT margin of 8% for the EV unit by the end of 2026. The Ford Model e had a profit margin of negative 40% in 2022.
During an investor event, Ford CFO John Lawler stated that the company had already seen improvements in the productivity of the EV unit. “From a contribution margin perspective, we expect Model e to approach breakeven at the end of this year, and, in 2024, we believe our first-generation products can be EBIT margin positive,” stated John Lawler. He further added that the Model e won’t bring in profits for a while because of heavy investments the company will be making to boost production and bring in new EV models.
Lawler stated that the company expects to have a positive 8% EBIT profit margin in the coming four years by building more EVs and allowing the supply chain to mature. He also added that the company is focusing more on energy-efficient designs that will reduce the battery cost as well as size. Lawler stated that the company still considers a reduction in the manufacturing costs of making its first-generation EVs.
Analysts, on the other hand, even after receiving details are skeptical if the automaker can achieve an 8% EBIT margin on electric vehicles by 2026. Colin Langham, Wells Fargo analyst stated “It’s unclear how Ford expects to get to its 8% 2026 target margin for Model e”. Ford CEO stated that the company will provide more information on Model e’s way to profitability during the firm’s annual capital markets day happening in the month of May.