Ford Motor Company's electric-vehicle losses could shrink more quickly than Wall Street had expected, according to a new analysis from RBC Capital Markets. The investment bank says the automaker's latest quarterly update points to better financial performance at its Model E EV division, helped in part by a fast-growing software and services business.
What RBC is saying
In a research note published Tuesday, RBC analysts said Ford's recent earnings report showed improving unit economics at Model E — the company's dedicated electric-vehicle unit. Unit economics refers to the profit or loss on each vehicle sold, a key metric for automakers transitioning to EVs. The bank raised its 2026 operating-profit outlook for Model E, implying a sizable improvement from earlier estimates.
RBC also reiterated Ford's stated goal of reaching profitability at Model E by 2029. While that timeline remains unchanged, the faster-than-expected narrowing of losses in the near term suggests the company may be on a stronger footing than some investors had assumed.
Ford has been investing heavily in its EV lineup, including models like the Mustang Mach-E and the F-150 Lightning. But like many traditional automakers, it has faced high production costs and price competition from Tesla and Chinese rivals. The company has also scaled back some EV spending plans in recent months as demand growth has slowed.
The software angle
Beyond the vehicle business itself, RBC highlighted a second, less cyclical driver of improvement: software and services. Ford now says it has more than 14 million connected vehicles on the road — cars and trucks that can receive over-the-air updates, offer subscription features, and generate recurring revenue.
That connected-vehicle fleet is a growing asset for Ford, similar to how other automakers like General Motors have been building out their own software ecosystems. Services such as navigation, remote start, and driver-assistance features can be sold on a subscription basis, providing a steady revenue stream that is less tied to the ups and downs of vehicle sales.
For context, software revenue is a high-margin business compared to manufacturing cars. Even modest per-vehicle subscription fees can add up quickly when multiplied by millions of vehicles. RBC sees this as a key part of Ford's path to profitability in its EV unit, alongside cost cuts and improved manufacturing efficiency.
What it means for investors
For everyday investors, the RBC note offers a more optimistic view of Ford's EV transition than the market has generally priced in. Ford shares have been under pressure this year as the company navigated a costly strike with the United Auto Workers union and faced questions about the pace of EV adoption.
If Ford's EV losses are indeed narrowing faster than expected, that could improve the company's overall earnings outlook and potentially support the stock. Investors will want to watch for further updates on Model E's unit economics in Ford's next quarterly report, as well as any new details on subscription revenue from connected vehicles.
It's also worth noting that RBC's view is just one analyst's take. Other firms may have different estimates. But the note underscores a broader theme: the profitability of legacy automakers' EV businesses may hinge as much on software and services as on the vehicles themselves.
For comparison, other companies have also been raising their outlooks as they find new growth drivers beyond their core products. And in the auto sector, the shift to software-based revenue is still in its early innings.
The bigger picture
Ford's EV strategy is part of a larger industry transformation. Automakers worldwide are spending billions to develop electric platforms, build battery factories, and retool assembly lines. The transition has been bumpy, with demand sometimes falling short of expectations and price wars squeezing margins.
But companies like Ford that have a large installed base of connected vehicles may have an edge. The ability to generate recurring revenue from software can help offset the high upfront costs of EV development. RBC's analysis suggests Ford is making progress on both fronts — cutting EV production costs while building out its software business.
Investors should keep an eye on Ford's next earnings call for more details on Model E's trajectory and the growth of its connected-vehicle services. The company's ability to hit its 2029 profitability target for the EV unit will depend on continued improvement in both areas.
