Automaker wants to expand electric vehicles and increase profits
Ford Mustang on display at the NY Auto Show on April 6, 2023.
Scott Mlyn | CNBC
DEARBORN, MI— Ford engine makes his case to Wall Street at an investor event on Monday, sharing details of his plan to profitably build millions of electric vehicles while expanding its traditional operations.
Ford CEO Jim Farley opened the day by discussing the company’s growth plans for its gas-powered, fleet and electric business units.
“I’m not here to tell you they were underrated, you’ll make your own decision,” Farley said.
ford said early Monday that the company is sticking to its 2023 guidance of adjusted EBIT of $9 billion to $11 billion and adjusted free cash flow of about $6 billion.
The company also announced a number of new lithium product supply contracts ahead of the event to support its plan to dramatically boost electric vehicle production.
Ford is targeting an 8% EBIT margin for its electric vehicle division and a production rate of 2 million electric vehicles by 2026, versus an expected 600,000 by year-end. The company also expects to simplify its operations and grow the company’s margins from traditional products to low double-digit EBIT margins of 7.2% in 2022.
For the traditional business, Kumar Galhotra, President of Operations, said a margin of 8 percentage points should be achieved through reductions in structural and controlled costs. This will help offset 6 percentage points in net prices.
“Demand continues to exceed capacity for our key.” [internal combustion] vehicles,” said Galhotra. “Over the next 10 months, Ford Blue will increase its capacity by over 160,000 units.”
This increase may come as a surprise given the company is investing billions in electric vehicles. Galhotra said that while the company expects sales of traditional vehicles to decline after 2025 in exchange for electric vehicles, internal combustion engine vehicles will be on the market “well into the next decade,” he said.
It is becoming increasingly difficult for traditional automakers like Ford to profitably manage the transition from traditional powered vehicles to electric vehicles.
Doug Field, chief advanced product development and technology officer, said a key to achieving this is increasing software sales and efficiency of its next-generation electric vehicles, which are scheduled to begin production in 2025.
Field used the automaker’s BlueCruise hands-free system for freeway driving as an example of Ford’s move towards software and subscription revenue models.
Ford expects to build 500,000 vehicles equipped with this technology in the 2024 model year. With an expected 20% takeover rate, BlueCruise alone could generate $200 million in revenue.
https://www.cnbc.com/2023/05/22/ford-capital-markets-day.html Automaker wants to expand electric vehicles and increase profits