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Automaker Increases Profitability by Ramping Up its EV Production

Automaker on ramping EVs, boosting profits

Automaker on ramping EVs, boosting profits

Ford Motor hosted an investor event on Monday, outlining how it plans to build millions of electric vehicles (EVs) profitably while expanding its traditional operations. CEO Jim Farley discussed the company’s growth plans for its gas-powered, fleet, and electric business units. The carmaker is hoping for an 8% EBIT margin on its EV unit and a 2 million EV production run rate by 2026, up from an expected 600,000 by year-end. The auto manufacturer announced new deals for lithium supplies ahead of the event.

Ford announced that it is maintaining its 2023 guidance of between $9 billion to $11 billion in adjusted EBIT and approximately $6 billion in adjusted free cash flow. However, the company is expected to lose around $3 billion on its “Model e” electric vehicle business this year, offset by the profits it makes in its traditional “Blue” and “Pro” fleet businesses.

Ford anticipates that vehicles with internal combustion engines will still be available well into the next decade. The challenge for the company is to efficiently balance this shift from traditional vehicles with engines to EVs. One solution is increasing efficiencies in its next-generation EVs, which will start production in 2025.

Doug Field, Ford’s chief advanced product development and technology officer, talked about the company’s push into software and subscription revenue models, including the BlueCruise hands-free highway driving system. For the 2024 model-year, Ford expects to build 500,000 vehicles equipped with the hands-free technology and potentially earn $200 million in revenue from an expected take rate of 20%. Field said Ford’s approach to creating EVs is fundamentally different from its traditional approach to vehicle development, emphasizing that software will define and control many new features.

FAQs:
1. What did Ford announce at its investor event on Monday?
Ford announced plans to build millions of EVs profitably and expand its traditional operations.

2. What is Ford’s target for its EV unit by 2026?
Ford hopes to achieve an 8% EBIT margin on its EV unit and a 2 million EV production run rate by 2026, up from an expected 600,000 by year-end.

3. Is Ford maintaining its 2023 guidance?
Yes, Ford is maintaining its 2023 guidance of between $9 billion to $11 billion in adjusted EBIT and about $6 billion in adjusted free cash flow.

4. How much is Ford expected to lose on its “Model e” electric vehicle business this year?
Ford is expected to lose around $3 billion on its “Model e” electric vehicle business this year.

5. How does Ford plan to balance the shift from traditional vehicles with engines to EVs?
One solution for Ford is to increase efficiencies in its next-generation EVs, which will start production in 2025.

Automaker on ramping EVs, boosting profits
Automaker on ramping EVs, boosting profits

“Automaker focusses on increasing profits with the production acceleration of electric vehicles”

Ford Motor is presenting its roadmap to Wall Street on Monday as it aims to build millions of EVs profitably while expanding its traditional gas-powered operations. During the investor event, Ford CEO Jim Farley discussed the company’s growth plans for its gas-powered, fleet, and electric business units. The company reaffirmed that it is on track to meet its 2023 guidance of between $9 billion to $11 billion in adjusted EBIT and about $6 billion in adjusted free cash flow. Ford also announced several deals for the supply of lithium products in support of its plan to increase electric vehicle production to 2 million per year by 2026.

While Ford expects to lose around $3 billion on its “Model e” electric vehicle business this year, it is offset by profits from its traditional “Blue” and “Pro” fleet businesses. The automaker has separated these businesses and started reporting them separately this year. The company aims to increase margins from traditional products to low double-digit EBIT margins up from 7.2% in 2022. Kumar Galhotra, President of Operations, expects eight percentage points of margin reduction in structural and controlled costs in the traditional business, offsetting six percentage points in net pricing.

Despite investing billions of dollars in EVs, Ford expects vehicles with internal combustion engines to be around “well into” the next decade. The company’s traditional car business earned $2.6 billion for the first quarter, while the automaker’s fleet operations reported $1.4 billion in earnings. Profitably balancing the shift from traditional vehicles with engines to EVs is a challenging task for automakers. Chief Advanced Product Development and Technology Officer, Doug Field, emphasized that software would control many new features when the company produces its next-generation EVs, which will define and control previously unimagined characteristics of EVs.

Field also talked about the automaker’s move into software and subscription revenue models using BlueCruise hands-free highway driving as an example. For the 2024 model-year, Ford expects to produce and sell 500,000 hands-free technology-enabled vehicles. At an expected take rate of 20%, Field said BlueCruise alone could amount to $200 million in revenue, describing it as a “different kind of revenue” that is accretive to margins and less cyclical than vehicle sales.

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