Ford Is Hemorrhaging Billions Of Dollars, But It Says It’s Not Worried, Here’s Why
Ford is expected to lose $3 billion in sales due to the cost of EV production, but it is confident it will be able to recoup any losses in sales in the coming years as the EV industry continues to grow and mature.
Automotive giant Ford is losing money by the truckload but is still adamant that it will hit its profit targets. The automobile manufacturer expects to lose up to $3 billion due to heavily investing in their electric vehicles. The sales of these vehicles are down due to consumers reducing their spending amid recession fears.
But despite an eye-watering drop in revenue, they remain defiant that they are still on target to hit their annual profit expectation this year. They forecast to bring in a revenue of between $9 billion and $11 billion.
Both the figures for their losses and profit come before expenses. This new $3 billion loss is higher than what the company lost on electric vehicles in the previous two years. In 2021, Ford reported a loss of $900 million and $2.1 billion in 2022, all from investing in their electric vehicle production.
The automotive company is optimistic that this investment is worthwhile, as they expect their excellent electric vehicles to start bringing in profits very soon. By 2026, they are forecasting the EV line will be a profitable business sector, as they are increasing the production of electric vehicles to 2 million globally per year by the end of 2023.
Ford’s Mustang Mach E was slashed in price this year. Even though the Mach E has a long waiting list as it is extremely popular with customers, Ford ran into several issues during the production of this vehicle. Ford’s CEO Jim Farley touched on some of these issues during an earnings call this year.
It seems that Ford underestimated the vehicle’s weight and had to add a bigger and more expensive battery to combat this. Also, due to this extra weight, they had to redesign the braking system so that it could take the weight without it becoming a safety issue. All these unforeseen costs left Ford $2 billion short on profits last year. Something that investors were not too pleased about.
These investors will meet again this week to discuss the investment into electric vehicles and the future of each product. Usually, within these meetings, profit margins are looked at by region, but this time they will be looked at by product to ensure that there isn’t one product costing the company billions.
Ford’s vehicles are split into three different categories depending on the type of engine that they possess. Ford blue is for all vehicles with traditional combustion engines; Ford Model e contains all their electric vehicles, and Ford Pro is the category for commercial vehicles.
Last year, Ford made a combined profit from the three categories before expenses of $12.7 billion, but there are expecting to increase that number to a hefty $14.3 billion. The $3 billion dollars they are losing on electric vehicles seems small compared to Ford’s extensive profit margins.
Ford’s electric vehicles are some of the most popular EVs on the road, especially the Ford F-150 lightning, so expecting to turn a profit in the next three years from these vehicles is highly probable.