Ford forecasts its EV division will lose $3 billion in 2023 after losing $2 billion last year: ‘Startups lose money’
Ford’s play could prove to be a very costly bet for the electric vehicle market.
The car company said Thursday that its electric vehicle division, called the Ford Model E, is likely to post a loss of $3 billion this year. Ford shared the updated forecast as part of a new financial reporting structure that breaks down the data into three categories: Ford Model E, for electric vehicles; Ford Blue, for its conventional cars; and Ford Pro, for its commercial vehicles. Earlier, Ford reported profit and loss by region.
Yet the carmaker dismissed concerns about the multibillion-dollar loss, casting it as a necessary cost of breaking into a new market.
“Startups lose money as they invest in capability, develop knowledge, build volume and gain share,” CFO John Lawler told a media briefing.
“After 120 years, we have essentially outlived Ford,” he said.
Ford also updated its previous earnings forecast using its new structure, which showed its electric vehicle division projected to lose $2.1 billion in 2022 and $900 million in 2021.
Despite losses in its electric vehicle division, the rest of the company is still expected to turn a profit. The company expects pretax income from Ford Blue to grow from $6.8 billion in 2022 to $7 billion this year, while pretax income from the commercial vehicle division is forecast to reach $6 billion, up roughly from the $3.2 billion recorded in 2022. is doubled.
Shares of Ford declined 0.5% on Thursday, while the broader S&P 500 gained 0.3%.
an ev price war
Earlier this year, Ford slashed the price of its Mustang Mach-E electric car as it tries to grab market share from rivals like Tesla and General Motors. At the time, Ford CEO Jim Farley said the price cut was a bid to “make EVs more accessible”.
Tesla also cut prices of some EV models earlier this year. The carmaker is also reporting slowing sales, with vehicle deliveries in the most recent quarter coming in below Wall Street estimates.
On Thursday, Ford said it expected to make 600,000 electric vehicles by the end of the year, and eventually two million EVs annually by the end of 2026.
That would still be far below leaders in the field like Tesla and China’s BYD. Tesla, which has about two-thirds of the US market for electric cars, plans to produce 1.4 million EVs in 2022. That same year, BYD sold 1.9 million “new energy vehicles,” a category that includes both plug-in hybrids and pure-battery vehicles. Vehicle.
Ford will distribute its first-quarter earnings—likely on May 2—using its new reporting structure.
This story originally appeared on Fortune.com
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