Ford Expects $3B Loss on Tax-Subsidized EV Venture in 2023
Written by Scott McClallen, The Center Square
Published March 28, 2023
Michigan taxpayers bet $1.6 billion in subsidies on Ford Motor Company's new BlueOval electric vehicle battery plant in Marshall, but Ford expects to lose $3 billion on its EVs this year, it recently told investors.
John Mozena, president of the Center for Economic Accountability, a nonprofit organization for transparent economic development policy, told The Center Square in an email the major financial loss “[H]ighlights the dangers of turning taxpayers into speculative investors through so-called ‘economic development’ programs.”
“If automakers’ losses are being driven by federal policy that’s promoting a particular green technology, what happens to Michigan taxpayers’ investments in those battery plants if the policy changes or the technology is replaced by something better or more profitable?” Mozena said.
The auto giant faces an uphill battle to convince Michiganders that EVs are better than vehicles with internal combustion engines. Less than 30,000 EVs are registered in Michigan compared to 6.5 million ICE vehicles. Moreso, the average EV cost is roughly $65,291, according to Kelley Blue Book.
Meanwhile, the average price for a gas-powered vehicle was $48,100. Moreover, many used gas-powered cars cost between $5,000 and $15,000.
Ford claims the BlueOval factory will be key to dropping the cost of EVs via lithium iron phosphate batteries and pump out 2 million vehicles globally by 2026.
After its restructure, Ford will report results by three separate businesses: Ford Blue, iconic gas, hybrid vehicles; Ford Model e, breakthrough EVs; and Ford Pro, commercial products and services. It previously reported results by region.
“We’ve essentially ‘refounded’ Ford, with business segments that provide new degrees of strategic clarity, insight and accountability to the Ford+ plan for growth and value,” CFO John Lawler said said in a statement. “It’s not only about changing how we report financial results; we’re transforming how we think, make decisions and run the company, and allocate capital for highest returns.”
Ford Controller Cathy O’Callaghan said three principles guided the new segmentation: fairly representing the business models of each segment, giving the Ford Blue, Ford Model e and Ford Pro teams both the latitude and accountability for their success, and being easy to understand and simple to execute.
“This wasn’t a simple proforma spreadsheet exercise,” O’Callaghan said in a statement. “It represents nearly a year of disciplined work by hundreds of Ford people to help us capture the huge strategic opportunity of Ford+ and provide unique transparency into our business.”
Ford said it’s aiming for a 10% margin target for company earnings before interest and taxes by the end of 2026.
For 2023, Ford said it expects to earn about the following before interest and taxes: about $7 billion for Ford Blue; a full-year loss of about $3 billion for Ford Model e; and approaching $6 billion for Ford Pro, nearly twice its 2022 earnings.
Ford plans to announce first-quarter results May 2.