Ford expects billion dollar losses over electric vehicles
Ford presented its business figures for the first quarter of 2023, breaking them down for the first time into the three core business units Ford Blue (combustion cars and hybrids), Ford Model e (electric vehicles) and Ford Pro (commercial vehicles). However, the electric car business is expected to be profitable as early as 2024.
While Ford Blue and Ford Pro are already profitable, Ford Model e, which was spun into a separate business unit in March 2022, posted a quarterly loss of 722 million US dollars, the equivalent of 654 million euros. For the full year 2023, Ford expects a loss of $3 billion (2.7 billion euros) for its electric vehicle business. However, Ford says that it plans to break even with its first generation of electric vehicles by the end of 2024.
Across all three divisions, Q1 earnings before interest and taxes were $3.4 billion (€3.1 billion), with Ford reporting net income of $1.8 billion (€1.6 billion). Q1 2022 still showed a net loss of 3.1 billion dollars after Ford had booked a billion-dollar write-down for its shares in the EV start-up Rivian – Ford has since sold a large part of its Rivian shares.
Ford had already repeatedly stressed that it would incur billions in losses for the switch to electric mobility – among other things because the enormous expenditures for development and the conversions of the factories were only offset by low sales for the time being. Specifically, Q1 2023 sales were around €700 million for Ford Model e, compared to $25.1 billion for Ford Blue and $13.2 billion for Ford Pro.
The move alone to break down the quarterly results by the three most important business units is considered a watershed in Ford’s 120-year history: until now, the company has broken down its business figures by region. With the new breakdown, the board around CEO Jim Farley wants to show investors how the company is preparing for the new competition and the transformation towards electric drives – the start-up costs for electric car production are to be presented transparently in this way and not offset in the company’s overall balance sheet.
The carved-out eMobility unit Ford Model e is to operate like a start-up, as Ford emphasises in the announcement. In the quarterly earnings conference call, both Farley and CFO John Lawler indicated that all startups lose money at the beginning, from Amazon to Tesla. Lawler reiterated his view that he sees Ford Model e on track to break even in 2024.
In addition, against the backdrop of production increases for its volume E models in the US, Ford has opened the order books for its technically improved Mustang Mach-E, again reducing the model’s prices. They dropped by $3,000 or $4,000 depending on the variant and now start at $42,995. It is the second US price cut for the Mustang Mach-E this year, following January. The Mustang Mach-E is eligible for US-wide tax credits of $3,750 in 2023 under the Inflation Reduction Act.