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Traditional auto makers are trying to scale their own electric vehicle businesses, chasing down
Tesla
,
looking to win market share in that growing slice of the automotive business. No one knows, however, how much traditional car companies are making, or losing, producing EVs.
On Thursday morning, Ford unveils its new financial reporting framework. Instead of reporting sales and profits by geographic region, Ford will report them by EVs, traditional vehicles, and the company’s commercial business. Ford Credit should continue to be its own reporting segment. Ford has named its EV business Model e, its traditional business Ford Blue and its’ commercial business Ford Pro.
Coming into Tuesday trading, Ford stock is down about 4% year to date. Tesla shares are up about 49%. The S&P 500 is up about 3%. The Dow Jones Industrial Average has lost about 3% so far in 2023.
Lifting the veil on the Model e business is a bold move. Ford probably isn’t making money selling EVs yet. The company delivered almost 62,000 EVs in 2022. That’s enough to make it the second largest seller of EVs in the U.S., behind Tesla, which sold 1.3 million globally in 2022 including more than 500,000 in the U.S.
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When Tesla was delivering EVs at a rate of about 60,000 units a year, similar to what Ford did in 2022, Tesla produced gross profit margins in the 20% range and operating profit margins of about negative 15%, excluding stock-based compensation. Tesla was also generating more than $1 billion in quarterly sales.
Guessing at the materials, labor, operating expenses, R&D, marketing, and other expenses, Ford’s EV business might have produced gross profits of about 20% in 2022 and an operating profit margin of negative 10%. That’s a very rough estimate. Ford’s allocation for corporate overhead, what it pays for batteries, and many other things just aren’t known.
Predicting losses isn’t a stretch.
(GM), for its part, isn’t making money in EVs yet, saying in November that its EV business will be “solidly profitable” by 2025. Reaching that level requires more EV sales and GM’s own, local, battery production among other things.
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And that means more production. Car plants cost billions and a single factory can produce 500,000 vehicles a year. Auto makers need scale to improve margins. Tesla started producing consistent operating and bottom-line profits after it was producing about 400,000 vehicles a year from one plant. Tesla’s transition to profitability took place around 2019.
Ford makes its highest-selling EVs, the Mustang Mach E and F-150 Lightning, at two plants, one in Mexico and one in Dearborn, Michigan. The two plants employ about 1,750 people combined. Production there will be key if Ford is to join Tesla and
(1211.Hong Kong) among the world’s profitable EV makers.
Tesla produced operating profit margins of about 17% in 2022 and is expected to produce about 14% in 2023. Margins are expected to move lower because Tesla cut prices for its vehicles. BYD produced operating profit margins of about 5% in 2022 and is expected to produce operating profit margins of almost 6% in 2023.
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Electric vehicles, both all battery electric and plug-in hybrid, account for about 10% of global light vehicle sales in 2022. As EVs grow, investors will be looking for more detail about EV profits. Ford’s move might be copied by other traditional car makers down the road.
Its new financial reporting is only the beginning.
Write to Al Root at allen.root@dowjones.com
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