An In-Depth Look at Ford's Electric Vehicle Business
The electric vehicle industry is rapidly growing and becoming a top priority for automakers around the world. Ford Motor Company is no exception, with a goal of investing 30 billion USD in electric vehicles (EVs) by 2025. However, this ambitious plan comes with a cost.
Recently, Ford reported that it expects to lose 3 billion USD through its EV business this year. In this article, we will delve into Ford's EV business, analyze its profitability, and discuss the company's plans for the future.
Understanding the Numbers
It is no secret that Ford's EV business has not been profitable in recent years. The company's Model e vehicles suffered a loss of 2 billion USD last year, and it is expected to lose another 6 billion USD cumulative by 2023. The first generation of EVs may turn profitable only by the end of 2024. However, Ford is not deterred by these losses, as it expects to acquire a pretax margin of 8% by 2026.
What is a pretax margin, and how does it measure efficiency? A pretax margin refers to the percentage of sales that has been converted into profits by the company before deducting taxes. This accounting tool is used to measure the efficiency of a company, as it shows how much of each dollar of revenue is turned into profit. A higher pretax margin indicates a more efficient company, as it can generate more profits from its sales.
So, what does the future hold for Ford's EV business? Despite the current losses, Ford is determined to become a leader in the EV industry. The company has announced plans to invest 22 billion USD in EV development and 7 billion USD in autonomous vehicle development by 2025. In addition, Ford plans to release a lineup of EVs that will cover a wide range of segments, including trucks, SUVs, and sedans. By 2030, the company expects that 40% of its global vehicle sales will be EVs.
Another significant change in Ford's business strategy is the shift towards reporting financial conclusions based on business units instead of geographical regions. According to John Lawler, Ford's Chief Financial Officer, this change will allow the company to focus on specific businesses and their profitability, rather than broad geographical regions. This approach will enable the company to make informed decisions about its investments and prioritize its resources accordingly.
In summary, Ford's EV business is currently facing losses, but the company remains committed to its ambitious goals. With significant investments in EV and autonomous vehicle development, along with a diverse lineup of EVs planned for release, Ford is positioning itself as a leading player in the EV industry. The shift towards reporting financial conclusions based on business units will enable the company to make strategic decisions and prioritize its resources effectively. While it may take some time for Ford's EV business to turn a profit, the company's determination and vision for the future show that it is ready to take on the challenges of the rapidly evolving automotive industry.