• Ford expects to lose $3 billion in 2023 with sales of its electric models.
• However, profits from sales of other types of vehicles will keep the company in the black this year.
• Ford is confident that EVs will soon be profitable.
Electrification is costly for traditional manufacturers and it will take some time to reach profitability. Ford reported this week that it will lose $3 billion (USD) on electric vehicle sales to consumers this year.
Despite this, the company still expects to meet its profit targets for this year of between $9 billion and $11 billion.
Ford noted that both the losses from EV sales and the overall profit figures are calculated before interest and tax expenses. The $3 billion loss is roughly what the firm has lost on its electric vehicles over the past two years combined (about $900 million in 2021, $2.1 billion in 2022). This is the first time it has detailed results of its electric vehicle business.
The element protecting Ford, of course, is that it sells pickup trucks, and lots of them. There's an inescapable irony in sales of higher-polluting gas-engine vehicles helping mitigate the losses associated with going green.
Ford says it expects electric vehicles to start being profitable soon. It expects increased production to bring global production of such vehicles to an annual rate of two million units by the end of this year.
By comparison, as reported by CNN, Tesla posted a 22 percent profit margin in the fourth quarter, again excluding interest and tax costs as well as depreciation and amortization. Say what you will about Elon Musk and his company, it built its business model on electric vehicles and was able to finish the year profitable, somewhat against all odds.
Interestingly, when asked during a conference call with investors yesterday (Thursday), Ford CFO John Lawler said the company was confident in its forecasts, in part because of the number of Tesla alumni it was able to hire.
In Lawler’s view, “it’s about the talent we have. We all know there’s one profitable EV manufacturer. The folks that designed those vehicles are at Ford. It’s a whole new way of how we’re designing vehicles, very much focused on energy efficiency…. And we have the people at Ford that know how to do that.”
For the rest, it will be interesting come the New Year to see Ford's actual results for 2023. A forecast is one thing. The reality is sometimes quite different (in either direction).
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