Like many other prominent auto manufacturers, Ford Motor Company is aggressively expanding its lineup of electric vehicles. However, Ford recently reported that it is projected to lose approximately $4.5 billion from electric vehicles this year. This is a $1.5 billion upward revision from $3 billion.
According to Ford’s second-quarter financial results, which were reported last week, “Ford Model e,” the name of the electric vehicle division within Ford, has lost roughly $1.8 billion halfway through the year. The year-end projection of losses of $4.5 billion more than doubles the 2022 losses in the EV division of $2.1 billion.
Ford is enduring these steep losses despite substantial revenue increases. Revenue is up 12 percent year-over-year to $45 billion, where Ford is also seeing higher net income and adjusted EBIT with solid cash and liquidity on hand. More specifically, the Model e division’s revenue has increased by about 39 percent as the car company scales up production and prices the cars competitively. Ford is anticipating to produce 600,000 vehicles per year by 2024.
Ford CEO Jim Farley spoke about the “volatile” adoption of EVs and how key it is to navigate the new, dynamic space in the car industry. “The shift to powerful digital experiences and breakthrough EVs is underway and going to be volatile, so being able to guide customers through and adapt to the pace of adoption are big advantages for us,” said Farley. “Ford+ is making us more resilient, efficient, and profitable, which you can see in Ford Pro’s breakout second-quarter revenue improvement (22%) and EBIT margin (15%).”
Farley also stated that the near-term pace of EV adoption is slower than anticipated. However, the CEO indicated that Ford is positioning itself to attain first-mover advantages in the EV space and foster a sense of brand loyalty among its customer base.
“The near-term pace of EV adoption will be a little slower than expected, which is going to benefit early movers like Ford,” Farley continued. “EV customers are brand loyal and we’re winning lots of them with our high-volume, first-generation products; we’re making smart investments in capabilities and capacity around the world; and, while others are trying to catch up, we have clean-sheet, next-generation products in advanced development that will blow people away.”
Ford CFO John Lawler stated earlier this year that his company views its electric vehicle division as a startup within Ford Motor Company. Startups typically aren’t expected to attain profitability in the company’s early years. Therefore, Ford isn’t as concerned with the billions of losses as it looks ahead to the future when EV adoption is greater. “Ford Model e is an EV startup within Ford,” Ford CFO John Lawler stated. “As everyone knows, EV startups lose money while they invest in capabilities, develop knowledge, build volume and gain share.”
The American Tribune reported earlier this year on competition within the EV space. Tesla had been accused of “weaponizing” price cuts made possible with its vast economies of scale. Subsequently, other auto manufacturers, such as Ford, were forced to play their hand and lower prices on their EV lineup. Shares of Ford Motor Company took a hit as shareholders were concerned about the impact this would have on profitability.