As Electric vehicles become more and more prevalent in the automotive industry, legacy automakers such as Ford are having to make massive investments in order to stay competitive. Ford’s CFO John Lawler recently revealed that Ford’s EV unit is on track to lose $3 billion this year, as the company pursues an aggressive EV production ramp. With Ford aiming for an annual run rate of 2 million EVs by 2026 and a 8% pre-tax profit margin by the same time, such a large investment is necessary in order to achieve success in the near future.
Ford has the industry’s most aggressive EV production ramp, and is aiming for an annual run rate of 600,000 EVs globally by the end of this year. This is compared to the current EV market leader, Tesla, who is aiming for a 50% year-on-year production growth. Ford’s CFO John Lawler argued that despite the unprofitability, the company’s “Model e” unit should be seen as a startup, and will require this massive investment in order to succeed.
Other legacy automakers, including General Motors and Volkswagen Group, are also expecting the shift to Electric vehicles to be costly and unprofitable. General Motors’ CEO Mary Barra has previously stated that the American auto group also aims for profitability in the 2026 timeframe.
However, the investment in Electric vehicles is no surprise. In order to remain competitive in the automotive industry, legacy automakers must make the shift towards Electric vehicles. Ford has already revealed its intention to report its financial results in separate business units, and is ditching the region-specific financial reporting in favor of reporting by five global markets. With the continuing success of its “Ford Blue” gas vehicle decision, it is still possible for the company to achieve overall profitability.
Ultimately, Ford’s aggressive EV production ramp is necessary in order to remain competitive in the automotive industry. Despite the large price tag, the company’s “Model e” unit is in line to become profitable by 2026. As such, this investment may be the key to Ford’s success in the near future.