Ford CEO Jim Farley Says Gen-2 Vehicles Will Be Profitable In 'First 12 Months Of Their Launch'

Dearborn-based Ford Motor Co F expects its next generation of EV products to deliver profits over its EV segment’s cost of capital.

What Happened: Ford CEO Jim Farley said during the company’s full-year earnings call on Tuesday that he expects its Gen-2 products to be profitable in the first 12 months of launch.

“Our next Gen 2 products will be profitable in the first 12 months of their launch. And that will mean that we’ll get to mid to high single-digit EBIT profit margins over their life cycle, and that’s going to deliver profits above Model E’s cost of capital,” Farley said.

The CEO said that the company won’t go to market with the vehicle unless convinced of profitability, hinting at possible changes to its launch timeline. The idea is to enable a profitable EV business capable of standing on its own, he added.

The idea is to enable a profitable EV business capable of standing on its own, company CFO John Lawler said, while noting that rivals including several Chinese EV makers and Tesla Inc have already achieved profitability.

“As Jim said, our Gen 2 vehicles we won’t launch unless we can get to a profit and a return on that capital that we’re investing there at the pricing environment that we now understand is reality,” company CFO John Lawler said.

Why It Matters: Ford expects losses to widen to a range of $5 billion to $5.5 billion for its electric vehicle segment Model E this year, owing to pricing pressure and investment into its next generation of vehicles.

The company expects its first-generation vehicles to improve profits going forward this year. However, they are not very optimized from a cost standpoint, the CFO noted. "We put them through very quickly to get to market and you’re seeing that flow through," he said.

The Model-e EV business segment posted a full-year EBIT loss of $4.7 billion for 2023.

Price Action: Ford shares closed up 4.1% at $12.07 on Tuesday.

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