Ford expects internal combustion engine volume, profits to grow through 2025

DETROIT — Ford Motor Co. expects sales and profit margins from its internal combustion engine vehicles to grow for at least the next two years before the industrywide transition to electric vehicles starts to shrink that business.

Executives on Monday laid out their outlook for the company’s gasoline-powered business, known as Ford Blue, as well as its Model e EV unit and Ford Pro commercial unit, as part of a capital markets day event for investors and the media. Ford also reaffirmed its 2023 full-year guidance of $9 billion to $11 billion in adjusted earnings before interest and taxes.

Kumar Galhotra, head of Ford Blue, said profit margins from combustion vehicles will grow from 7.2 percent today to at least 10 percent by 2026. Those growth plans are driven by the company’s focus on profitable vehicle segments and high-margin, low-cost derivatives.

“Trucks, off-road and performance segments have a long runway,” Galhotra said.

Still, he said Ford Blue’s volume and margins are likely to shrink after 2025 as EVs gain popularity. Despite the eventual contraction of the business, Galhotra noted Ford sees “strong U.S. ICE and hybrid sales well into the next decade.”

As part of its work to increase Ford Blue profits, Galhotra said the company has identified $500 million in savings this year by reducing parts complexity and finding manufacturing efficiencies. For example, he said, the freshened F-150 full-size pickup debuting this year has 2,400 fewer parts than the current model.

Over the last two years, Galhotra said Ford has reduced the total orderable combinations on Explorer from 1,900 to 23, and, on Expedition, from 800 to 32.

Executives have said Ford has a roughly $7 billion cost gap with its competitors, mostly within Ford Blue.

CEO Jim Farley said Monday that his leadership team now convenes one Tuesday per month to focus specifically on material and supplier cost-cut opportunities.

“I’m starting to see an excitement around waste elimination; it’s not task-assigned,” Farley said.

CFO John Lawler said it’s on company leaders to achieve results.

“Quite honestly we know this is our biggest issue,” Lawler said. “We’ve told you this before and we haven’t delivered. We have to prove it.”

Ford sees growth in its Model e business, too.

The company on Monday reiterated plans to achieve 8 percent margins on its EVs by 2026, driven by volume growth, design improvements and savings from insourcing battery technologies. CFO John Lawler said Model e will sell about 1.2 million EVs annually by then.

Doug Field, Ford’s chief advanced product development and technology officer, said the automaker in 2025 will introduce an “affordable” three-row EV with up to a 350-mile driving range. Automotive News has reported Ford’s plans to build an Explorer-sized EV at its Oakville plant in Ontario, which is transitioning to build EVs.

In addition, the company plans to debut a full-size electric pickup in 2025 that will be built at its BlueOval City manufacturing campus in Tennessee.

Ford on Monday also announced deals to obtain the EV battery materials needed to support its growth plans.