While sales of electric vehicles continue to increase, Ford expects to see sales and profit margins of its internal combustion-powered models rise over the coming two years, if not a little longer.
While speaking at a capital markets day held for investors and the media in Detroit, Michigan, the head of the company’s combustion-powered business Ford Blue, Kumar Galhotra, noted that combustion vehicle profit margins will grow from the current 7.2% to at least 10% by 2026.
Auto News notes that aiding in the growth of profit margins is Ford’s focus on profitable vehicle segments as well as high-margin, low-cost versions of its vehicles, such as the Ford Ranger Raptor. Indeed, Ford chief executive Jim Farley confirmed earlier this month that Raptor models generate 30% higher margins than the base model they share roughly 80% of their parts with.
“Trucks, off-road and performance segments have a long runway,” Galhotra confirmed when speaking about the short-term future of Ford Blue. He added that Ford will see “strong U.S. ICE and hybrid sales well into the next decade.”
However, Galhotra did acknowledge that Ford Blue’s volume and profit margins will probably start to decline after 2025 with burgeoning demand for EVs.
Read: Ford’s Electric Car Unit Braces For $3 Billion Loss In 2023 As It Invests In New Tech
Ford Blue isn’t just looking for ways to boost profits with high-margin, low-cost derivatives but Galhotra revealed it has already identified $500 million in savings this year by improving manufacturing efficiencies and reducing parts complexity. This is particularly evident with the 2024 F-150 which has 2,400 fewer parts than the outgoing model. The number of available configurations of the Explorer has also been reduced from 1,900 to 23.
During its recent shareholder event, Ford also revealed that it will soon switch to non-negotiated pricing which will help to avoid dealer markups. Chief executive Jim Farley also said Ford expects to cut prices by 5% or more throughout the course of 2023.
