Wednesday, October 4, 2023
HomeBusinessThe automaker is working to increase electric vehicles and increase profits

The automaker is working to increase electric vehicles and increase profits

Ford Mustang on display at the New York Auto Show, April 6, 2023.

Scott Millian | CNBC

Dearborn, Michigan – Ford Motor It presents its case to Wall Street at an investor event Monday, where it shares details of its plan to profitably build millions of electric vehicles while growing its traditional operations.

Ford CEO Jim Farley kicked off the day by discussing the company’s growth plans for its gas, fleet and electric business units.

Related investment news


“I’m not here to tell you you’re underrated, you’re going to make up your own mind,” Farley said.

Ford said early Monday that it is maintaining guidance for 2023 of between $9 billion and $11 billion in adjusted earnings before interest and taxes and about $6 billion in adjusted free cash flow.

The company also announced ahead of the event a series of new deals to supply lithium products to support its plan to dramatically increase production of electric vehicles.

Ford is targeting an 8% profit margin on its electric vehicle unit and a production rate of 2 million electric vehicles by 2026, up from an expected 600,000 by the end of the year.

The automaker is expected to lose about $3 billion in its Model e electric vehicle business this year, offsetting profits in its traditional Blue and Pro businesses. The company separated the businesses and began reporting them separately this year.

In the first quarter, Ford said losses from its electric vehicle operations widened to $722 million in the first quarter from $380 million a year earlier. The company’s traditional automotive business earned $2.6 billion, and the company’s fleet operations posted $1.4 billion in earnings.

The company expects to streamline its operations and increase profit margins from traditional products to low double-digit EBITDA margins up from 7.2% in 2022.

For the traditional business, Kumar Galhotra, chief operating officer, said 8 percentage points of margin is expected to come from reductions in structural and controlled costs. This will help determine 6 percentage points in net pricing.

“Demand continues to outpace capacity on our switch [internal combustion] Galhotra said. “In the next 10 months, Ford Blue will increase capacity by more than 160,000 units.”

This increase may come as a surprise, as the company is investing billions in electric vehicles. Galhotra said that while the company expects its sales of conventional vehicles to start declining after 2025 versus electric vehicles, vehicles with internal combustion engines will be “in a significant period of time” over the next decade, he said.

Striking the profitable balance between switching from traditional motorized vehicles to electric vehicles is an increasingly difficult challenge for traditional automakers such as Ford.

The key to doing this, said Doug Field, chief product development and advanced technology officer, is to drive efficiencies in the next generation of electric vehicles that are scheduled to begin production in 2025.

A different kind of revenue

Field has also promoted payment in software and subscription revenue models, using the automaker’s BlueCruise hands-free highway driving system as an example.

“As we build next-generation platforms, we aspire to make this happen [BlueCruise] To as many customers as possible,” Field said. “When you can take your eyes off the road, everything changes.”

By 2024, Ford expects to build 500,000 vehicles equipped with hands-free technology. With an expected take rate of 20%, Field said BlueCruise alone could reach $200 million in revenue.

“My finance and business partners told me that this is a different kind of revenue,” he said. “They use these words like cumulative to margins, less cyclical than auto sales.”

Ford’s approach to creating electric vehicles is fundamentally different from its traditional approach to vehicle development, Field said, emphasizing that the software will identify and control many new features — including features that Ford has not yet developed, but will add to existing vehicles in the future through updates. . .

“The products we make are not living rooms,” Field said. “They move and robots work. And the ambition of our software goes way beyond the depth of how our products move, how they collect data, and how they support the people who will use them in real work.

“We call them unimaginably great products, because the best things we make are the ones we haven’t thought of yet.”



Please enter your comment!
Please enter your name here

Most Popular

Recent Comments