Ford Motor Company announced this week that its EV segment is set to take a huge pre-tax loss this year. That isn’t completely unheard of, especially when new technology is involved, but considering the technological issues, tepid consumer reaction, and cost associated with production, the company should be concerned. Check out the details via Reuters:
Ford Motor Co (F.N) expects its electric vehicle business unit to lose $3 billion this year, but remains on track to achieve a pretax margin of 8% by late 2026, the company said.
The projected loss was revealed ahead of a mid-morning briefing for investors and analysts on Thursday to discuss details of the automaker’s new financial reporting format.
Starting with first-quarter results, which will be announced on May 2, Ford will begin reporting by business unit for Model e (electric vehicles), Blue (combustion vehicles) and Pro (commercial vehicles and services).
The forced transition to electric vehicles, which have shown to be costly, unreliable, and largely unpopular with consumers, is undoubtedly going to put companies like Ford to the test. The automaker had to be bailed out by the government during the 2008-2009 auto crisis, and have seen a string of failures with their products, both sales related and mechanically. Reuters continues:
Ford projects Model e’s cumulative three-year loss from 2021-2023 at $6 billion, including a pro-forma loss last year of $2.1 billion, but expects the unit to be profitable on a pretax basis before the end of 2026.
Last year, Ford had a pretax loss of $600 million in China, broke even in Europe and posted a modest $400 million profit in South America, with most of its earnings before interest and taxes – $9.2 billion – coming from North America.
He said the automaker will have the global capacity to build 600,000 electric vehicles by the end of 2023 and 2 million by late 2026 – “and we intend to fully use that capacity.”
Ford expects to be profitable pre-tax on their ev segment by 2026, but what happens if there is a new administration in the White House in 2025. An administration that rolls back some of the preposterous economic regulations that have been choking out the American economy?
Ford's EV business lost $2 billion in 2022, offset by big profits in fleet and legacy units https://t.co/k43lb7BHtl
— Jason Buttrill (@JasonButtrill) March 23, 2023
If the GOP retakes the White House, certainly the production of domestic energy will increase, eventually leading back to lower gas prices. Electric vehicles are costly, unreliable, and currently have almost no infrastructure available in much of the United States.
If Ford does indeed intend to use the full capacity of their production potential for electric vehicles, will anyone buy them? Ford already posts regular losses in China, and much of the world isn’t sprinting towards ev’s at the pace the United States is.
The reality is, a new administration is a strong possibility in 2025, and with it less focus on production of electric vehicles and the pipe dream of windmills and solar panels powering America. Electric vehicles are in fact a fine ALTERNATIVE, but as a primary product they likely will never take hold as companies like Ford and General Motors envision. It will indeed be interesting to see if Ford is singing a different, slightly less electronic tune in five years.
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