Ford to Lose $3 Billion This Year On EVs As It ‘Refounds’ Company, Cuts Costs to Make ‘Model E’ Competitive

The Blue Oval is burning cash (and cutting costs) to accelerate its EV goals

Ford splits EV business from ICE operations — news
(Image: Ford)
  • Ford is going through billions of dollars as it builds up its electric vehicle business, called ‘Model E’, into a larger player to rival heavyweights like Tesla.
  • The Model E division will be a separate entity from Ford’s internal combustion vehicles (Ford Blue) and its commercial business (Ford Pro).
  • Each entity will report its financial results separately, lending us some insight into how much the automaker’s EV arm is making or losing.
  • Ford revealed Thursday that its Model E division lost $2.1 billion last year, and estimates it will lose a further $3 billion in 2023.
    • It’s expecting to continue posting losses until 2026, as its investing heavily into building new production facilities and rolling out new models to expand its EV footprint.
      • Ford estimates it will finally achieve profitability on its electric ventures in three years.

Turns out building up an EV business is massively expensive.

Virtually every automaker is pouring billions of dollars into developing and manufacturing electric vehicles for a major industry shift over the next several years. Ford is no exception, and the automaker provided a better idea of just how high the costs are running to position its ‘Model E’ division competitively to others in the EV space (namely Tesla).

Last year, Ford Motor Company last $2.1 billion on an operating basis building up Ford Model E. If you think that’s a major price to pay, the company says it expects to lose a further $3 billion in 2023. A large reason for the losses, of course, is the heavy investment toward new plants, battery technology and R&D to develop and produce new electric models in the coming years.

As part of a “teach-in” event for investors and analysts at the New York Stock Exchange, Ford shared further details on planning to bring Model E to profitability, and how that division will coexist with its internal combustion division (Ford Blue) and its commercial operations (Ford Pro). In essence, by cutting costs in its legacy auto business over time, it aims to make its EV operation more competitive and actually achieve profitability within Model E by 2026.

“We’ve essentially ‘refounded’ Ford,” said chief financial officer John Lawler. “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 the highest returns.” The three separate arms of Ford’s overall business, he says, will “provide new degrees of strategic clarity, insight and accountability to the Ford+ plan for growth and value.”

“Our cost structure is not competitive”

Talking to Yahoo Finance Live (video linked), Lawler says, “When you look at it, the EV business was a startup buried inside Ford.” As the division scales up, he affirms the losses Ford Motor Company’s incurred over the past few years. At this point and time, the automaker is aiming for an 8% profit margin on the Model E side of the business by 2026.

Unlike your conventional startups, though, Ford obviously has access to resources stemming from its “legacy” business building internal combustion vehicles. That, Lawler contends, is a key element pushing toward Model E’s profitability in the coming years. “We’ve been very transparent about the fact that our cost structure is not competitive. We know that [there’s about] $7-8 billion that we can take out and improve our competitiveness, and you will see that start to take hold as we get through the rest of the year, into 2024, and beyond.”

As ever, we’ll have to wait and see how everything actually pans out. As part of this three-way split, Ford is changing how it reports financial results. Instead of reporting regional sales, it will report globally for each business division, much like Tesla does with its earnings presentations. We’ll see this in action when Ford reports its first-quarter 2023 results on May 2.