Major automaker expects to hemorrhage billions from its electric vehicle business

(Unsplash)

John Hugh DeMastri
Daily Caller News Foundation

Ford expects to lose $3 billion on its electric vehicle department this year, the company announced Thursday.

The company will be reorganizing its financial reporting into three distinct branches, Ford Blue, Ford Model e and Ford Pro, which will develop gas-powered, electric and commercial vehicles respectively, according to a press release. In the three years starting 2021, Ford Model e is expected to report a $3 billion loss.

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“We’ve essentially ‘refounded’ Ford, with business segments that provide new degrees of strategic clarity, insight and accountability to the Ford+ plan for growth and value,” CFO John Lawler said. “It’s not only about changing how we report financial results; we’re transforming how we think, make decisions and run the company, and allocate capital for highest returns.”

Ford’s new structure and way of reporting earnings gives new insight into its EV business (which CFO said we should treat as a startup) as well as its other units. Interesting stuff! https://t.co/ORhwpYnLlD

— Kirsten Korosec (@kirstenkorosec) March 23, 2023

Is the push toward electric vehicles uneconomical?

The company will report its full first quarter results on May 2 under this new organizational structure, instead of by region as it typically does. It currently projects a $7 billion profit from Ford Blue, a slight tick up from 2022, while Ford Pro will nearly double to $6 billion in profit.

No major automaker, with the exception of Elon Musk’s Tesla, is expected to turn a profit on electric vehicles for years, according to CNBC. Ford faces the additional challenge of producing mass-market vehicles, which typically have lower profit margins than those of luxury vehicles like Teslas, and the company could currently be losing roughly $9,000 per electric vehicle sold, Deutsche Bank analyst Emmanuel Rosner told CNBC.

Ford still expects its traditional gas-powered vehicles to be its main drivers of profit, which will help fund its electric vehicle division, according to CNBC. To help boost margins, the company plans to cut roughly $3 billion in structural costs by the middle of the decade by “radically” simplifying and focusing on “world class-efficiency,” Kumar Galhotra, head of Ford Blue, said in a March 2022 interview.

Electric vehicles are expected to comprise an increasing portion of Ford’s commercial fleet, potentially putting pressure on the Ford Pro’s profits due to the higher price of electric vehicles, according to CNBC. Just 6,500 of 105,000 Ford Transit vans in 2022 were electric, but that number is expected to increase going forward.

“Our commercial customers are confused [about EVs], and they want a lot of help,” Ford Pro head Ted Cannis said at a conference in January, according to CNBC. “The key part for us to accelerate the move to electrification is to make it easier.”

This story originally was published by the Daily Caller News Foundation.

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