Ford Motors lost an estimated $2.1 billion last year in its electric vehicle unit, the company announced on Thursday, adding it expects $3 billion in losses for 2023. The automotive industry is floundering as interest rates skyrocket and consumer purchases slow, making it difficult for startup motor vehicle industries to flourish, CNBC reported.
The EV operation under Ford Motors should be considered a startup, the company said, and as with any other startup, it can take time for it to get off the ground. “We’ve essentially ‘refounded’ Ford, with business segments that provide new degrees of strategic clarity, insight, and accountability to the Ford+ plan for growth and value,” CFO John Lawler said in a news release.
Ford released its financial information to be more transparent about how its company and its EV endeavors are evolving after announcing in March of last year that it would be splitting into five business segments. The reorganization includes introducing Ford Blue, a traditional engine business, a Ford Model e electric vehicle unit, Ford Pro which operates its commercial and government vehicle unit, its automotive mobility solutions unit called Ford Next, and its Ford Credit unit which operates the company’s financial services.
Focusing on the Model e operation, Lawler said at a media briefing that financial losses are to be expected when building a startup, adding, “Startups lose money as they invest in capability, develop knowledge, build volume and gain share,” The Wall Street Journal reported.
Despite the profitability losses, the company says it projects ramping up production of its electric vehicles to 600,000 per year and will substantially increase to two million per year by the end of 2026.
The announcement comes after Wall Street analysts reportedly pushed Ford to reconsider its EV business last year, saying the company should instead separate it completely,” CNBC reported. Ford disagreed with the direction, saying by keeping it under the Ford umbrella, the company could draw on its existing expertise in manufacturing the products and utilize other strengths from its Ford Blue and Ford Pro units instead of building its EVs from scratch.
Now, by releasing individual financial reports instead of regional reports encompassing all units, Ford aims to show Wall Street how its EV branch is growing and more accurately track its progress.
“It’s not only about changing how we report financial results,” Lawler said in the news release. “We’re transforming how we think, make decisions and run the company, and allocate capital for highest returns.”