Profitability Of EVs -- May 13, 2023

Locator: 44636EVS.  

More and more articles talking about the difficulty making a profit in renewable energy.

This has been obvious among EV manufacturers for years. 

Exhibit A: Ford.

Link here.

Ford's EV sales grew a sizable 41% during the first quarter to 10,866 EVs, and its Model e segment lost $722 million in adjusted earnings before interest and taxes (EBIT) during that same time frame.

That essentially shows each vehicle that Ford's EV segment produces loses more than $66,000.

It's also fair to note that Ford's EV profitability is expected to get worse before it begins turning a profit in 2026. In fact, Ford Model e losses jumped from roughly $900 million in 2021 to $2.1 billion in 2022. Those losses are expected to reach $3 billion in 2023 as the company heavily invests in new models and factories to build scale and eventually turn billions in losses into billions in profits.

What does this mean?

It's now May 2023.

Ford's goal: 8% margin by YE2026.

YE2026 earnings call will be be mid-1Q27.

Three more quarters in 2023. Let's hope we have a soft landing.

Four quarters in 2024. Let's hope there's no recession.

Four quarters in 2025. Let's hope lithium plunges in price.

Four quarters in 2026. Let's hope no other EV manufacturers emerge.

That first quarter in 2027.

There will be sixteen earnings calls between now and the end of 1Q27 when Ford hopes to show margins of 8%. 

And analysts suggest the next few calls could be worse before they start to get better.

To put that in perspective, AAPL's margins:

• overall: 42%
• hardware: 37%
• services: 71%

Apple services will grow over time; hardware will have less growth but the percent that the services sector contributes to overall AAPL profits will increase proportionately more.