Ford Motor Co’s F efforts to pivot from traditional combustion engines to electric vehicles could see it run into a negative margin mix as the demand for IC engines is expected to remain strong for a while in the United States, CEO Jim Farley told investors on Wednesday.
What Happened: Farley was responding to an analyst question on the possibility of a negative margin mix playout as the company doubles down efforts to ensure 40% of its vehicles sold by 2030 will be electric and lowers investments in traditional engines.
“Generally speaking, that certainly could happen. We don't know how the demand will shift,” Farley said, adding that he believes the automaker is on the right track.
Ford plans to invest $30 billion in electrification efforts by 2025 and has revealed plans to build two new battery factories in a joint venture with Korean battery maker SK innovation.
See Also: Ford Stock Rises On Q2 Revenue Beat: What Investors Should Know
The Dearborn, Michigan-based automaker plans to electrify its most iconic models and has already unveiled an all-electric version of the F-150 pickup, the best-selling vehicle from any U.S. automaker. It is already selling the electric SUV under its iconic Mustang name, the Mustang Mach-E.
“We're electrifying all three of those in the next six months. And so far, the demand is actually higher than we expected. So I don't know what's going to happen. We don't know what's going to happen,” Farley said.
Farley said the pace of transition is also dependent on government support and the infrastructure build-out and that agility will play a key role in the buildup.
Why It Matters: Ford on Wednesday reiterated it expects to achieve an 8% operating margin in 2023, up from 4% in recent years. The automaker has not given out a margin plan beyond 2023.
Ford is not alone as rivals General Motors Co GM and Volkswagen AG VWAGY are all rushing plans for a quick switchover to electric vehicle lineup and a battery-cell production, a move spurred by Elon Musk-led Tesla Inc TSLA
Price Action: Ford shares closed 0.51% higher at $13.86 on Wednesday.
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Photo: Courtesy of Ford
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