As with most auto companies, Ford (F) has had a turbulent few years — a global semiconductor shortage and disrupted supply chain has put heavy limits on production of new vehicles while the pressure to keep up with competitors remains high.
Despite its longstanding place in people’s minds as the traditional American carmaker, Ford has had a recent string of successes in the EV realm. In December 2022, the F-150 Lightning was declared the top truck in America. The year before, the award dating back to 1977 went to another electric truck, Rivian (RIVN)’s R1T.
DON’T MISS: Ford Hits a Major Roadblock With Its EV Progress
But the good PR and even strong sales do not necessarily translate into strong earnings particularly when expenses related to production and development are very high.
On March 23, the automaker released numbers showing that its electric vehicle unit lost $3 billion before taxes over the last two years.
Ford
Here’s Why Ford’s Electric Vehicle Unit Is Bleeding Money
The carmaker divides its units into Model e (electric vehicles), Blue (combustion vehicles) and Pro (commercial vehicles and services). Model e is currently the one burning the most money as Ford Blue is expected to bring in $7 billion in pre-tax profit while Ford Pro is expected to bring in $6 billion.
Along with the F-150, Ford currently also sells two other electric car models: the Mustang Mach E SUV and an electric Transit commercial van.
“As everyone knows, EV startups lose money while they invest in capability, develop knowledge, build volume and gain share,” CFO John Lawler said of the results.
Over the coming few years, the carmaker hopes to continue developing new generations of these models which, at least at the moment, is an expensive undertaking that Ford is telling investors should be seen as an investment toward future profitability.
As of Thursday afternoon, they were up 0.70% at $11.56. Lawler further said that the carmaker remains on track to reach a pre-tax margin of 8% by 2026. As a result, Ford’s shares not only did not take a hit but even rose slightly following the announcement.
As of Thursday afternoon, company stock was up 0.70% at $11.56.
Ford, And Others, Are Continuing To Bet On EVs
More in-depth financial numbers will be released in a final-quarter earnings call on May 2. But the recent announcement was meant to warn investors of the losses and essentially explain the carmaker’s strategy going forward.
“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 highest returns,” Lawler said in a release.
In general, investing in electric vehicles is a very sound move given that the wider EV market is expected to quadruple to $957.42 billion by 2030.
While Tesla (TSLA) revolutionized the space, there are now more options than ever as other carmakers catch up — Teslas made up 79% of all new electric vehicles in the U.S. in 2020. By the start of 2023, that number had fallen to just one in three.
“Ford’s sales of electric vehicles expanded at approximately twice the rate of the overall electric vehicle segment in November as Ford prepares to increase production next year to meet U.S. demand,” the company said in a statement last November.
