Ford's big bet: Ford is investing $30bn into electric vehicles, but just how big of an investment is that?

Ford, arguably one of the most iconic American companies of the last century, announced this week that it plans to invest $30bn into electric vehicles over the next 5 years. Ford is shooting for 40% of its sales to be electric vehicles by 2030 — a target investors seemingly enjoyed as the company's shares rose almost 15% on the news this week.

‍Huge company, slim margins

‍Few industries are as competitive as making and selling cars — and Ford's financials are a prime example of this. Despite being a giant, Ford ekes out a slender profit margin. Since 2012 Ford's average net profit margin has averaged just 2.7%. With revenues regularly north of $150bn, that still translates into a sizeable profit of $4bn a year (on average) — but it doesn't leave much room for error if sales fall, costs rise, or both.

With that context in mind, the decision to invest $30bn into electric vehicles, when average net profit is around $4bn, is a big commitment — and it reflects a confidence at Ford that it will be $30bn well spent. Reservations for the Ford F-150 Lightning, Ford's new electric pick-up, have just passed 70,000 orders. Ford is getting serious about electric.