What Ford Wants You to Know About Its EV Plans
If there’s an elephant in the room for Ford Motor Company (NYSE: F) investors, it’s certainly the whopping $4.7 billion loss from its Model e unit, Ford’s division for electric vehicles (EVs). And while the $4.7 billion loss in 2023 was rough enough, it’s going to get worse before it gets better, as management expects the loss to reach over $5 billion in 2024.
Thankfully, Ford has updated its strategy a bit. Here’s what it wants investors to know about its EV plans going forward.
Flexibility
Investors were excited when Ford management announced plans for its Model e unit to reach profitability before taxes by late 2026, and even reaching 8% pre-tax profit margins. Unfortunately, thanks in part to stalling EV demand, investors can crumble up that target and push it back.
But rather than force-feed EVs into a market at unwanted prices, Ford is now preaching flexibility. “As the No. 2 EV brand in the U.S. for the past two years, we are committed to scaling a profitable EV business, using capital wisely and bringing to market the right gas, hybrid, and fully electric vehicles at the right time,” said Jim Farley, Ford president and CEO, in a press release.
One key takeaway from Ford’s update on EVs is that Ford is broadening its hybrid electric vehicle strategy. In fact, Ford plans to become more flexible and offer hybrid powertrains across its entire Ford Blue — its traditional gasoline vehicle business — by the end of the decade.
The skunkworks team
Another takeaway is that while Ford works on introducing hybrid options across its traditional vehicle lineup, it will be working on the next generation of EVs that will be new “from the ground up.”
Part of its all-new EV strategy will come from its skunkworks team, which is essentially a special team within Ford that was given the high-priority task of producing a low-cost EV platform with a high degree of autonomy and less corporate bureaucracy.
More specifically, Ford has a team in California that’s developing a low-cost, profitable EV platform that’s designed to be produce multiple vehicles at high and scalable volumes. Thankfully, Ford had created this team some time ago in a “secret” gamble that they would desperately need a low-cost platform for EVs sooner, rather than later.
A low-cost EV, high-volume, EV platform is exactly what this macro environment calls for, as the high end of the EV market is saturated, and consumer demand for EVs is stalling without affordable options.
What it all means
Right now, Ford is pushing back some scaling of its Model e unit in favor of relying on its traditional business to generate profits until EV battery costs, among other variables, come down and the time is right to scale the lower-cost EV platform and resume delayed EV ambitions.
It might not look like a great move, considering the Model e unit losses are set to widen again in 2024, but it’s the right move considering the EV market environment. Ford wants you to know it’s capable of being flexible, and that’s excellent news for investors, despite the heavy EV losses currently.
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Daniel Miller has positions in Ford Motor Company. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
What Ford Wants You to Know About Its EV Plans was originally published by The Motley Fool
