There are some caveats here, as well as some unanswered questions.
Not only does CEO Hackett say the upcoming all-electric Ford Mustang Mach-E will bring profit, but he also says the EV will make a profit "on vehicle one." Hackett continued:
“That’s surprising a lot of people because electrics have not had a history of making money. This will.”
The reason it's surprising a lot of people is the statement is not actually 100-percent true, although it all depends on how you look at it. Hackett explains the situation almost immediately after he says the first car will make a profit. He says it will make "a contribution margin," meaning revenue minus cost. However, he says that Ford will first have to amortize the development costs over time to make the Mach-E "totally profitable."
When asked how Ford is able to pull this off, Hackett goes into more of the details, but he won't talk about profit margins. One cost-saving measure is the fact that the automaker will build the Mustang Mach-E in Mexico.
“As we start to adopt more electric vehicles — we had capacity down there, we had no capacity in the United States — we’re going to have electric capacity here in the United States. They’ll be building other electric platforms.”
Another thing to keep in mind here is that Ford will follow in the footsteps of Tesla by launching the first Mach-E vehicles in higher-margin trim levels, which just makes sense. The base model won't come to market right away.
With all this said, we are still impressed that Hackett says the Mustang Mach-E will be a profitable vehicle so quickly. This is especially true since due to its struggle with efficiency, the car has a very large (and very expensive) battery pack. If Ford can figure out how to make its EVs more efficient in order to get the same range out of a smaller pack, profits will grow even more.
We are also impressed that Hackett even mentioned recouping the R&D costs, since those aren't generally factored into a car's cost to build versus its selling price. It's an investment that's expected, and over time, it gets covered.
For the remaining details, check out the video. Then, share your thoughts with us in the comments below.
Video Description via Bloomberg Technology on YouTube:
Ford CEO Says Electric Mustang Will Bring Instant Profit
Nov.18 -- Ford Motor Co. Chief Executive Officer Jim Hackett says the Mustang Mach E, an all electric sports utility vehicle, will be profitable from the first car. Hackett spoke to Bloomberg’s Ed Ludlow at the Mach E unveil event in Los Angeles.