Umair Gaines
Ford Motor Company has recently announced that it will be shifting its focus from electric vehicles (EVs) to internal combustion engine (ICE) vehicles, specifically gas-powered pickup trucks. This decision comes as a surprise to many, as the company had previously invested in EV production and infrastructure. However, Ford has stated that the demand for EVs is not meeting projected forecasts, and the high cost of producing large EV batteries has impacted their business. This move raises questions about the future of electric vehicles in the North American market and the impact on planned electric battery production facilities. Despite this, Ford has stated that it still plans to produce EVs more broadly, and this shift may be a strategic decision to balance production with current demand.
| Characteristics | Values |
|---|---|
| Date of announcement | 2nd September 2024 |
| Reason for cancellation | Demand for EVs is not meeting projected forecast |
| Future plans | Shifting production to gas-powered pickup trucks |
| Impact on battery production | Unclear |
| Financial impact | Loss of $4.7 billion in 2023, expected to increase to $5-5.5 billion in 2024 |
| Future EV plans | Rescheduling launch of electric truck and three-row SUV to 2026 and 2027, respectively |
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What You'll Learn
Ford cancels production of its planned three-row SUV
Ford Motor Company has announced that it will not be producing its planned three-row all-electric SUV. Instead, the company will focus on leveraging hybrid technologies for its next three-row SUVs. This decision is part of a wider update to Ford's electrification strategy, which includes altering its North American vehicle roadmap.
The cancellation of the all-electric SUV model will result in a roughly $400 million write-down of certain product-specific manufacturing assets, according to the company. This write-down includes the value of manufacturing equipment designed to build the scrapped electric vehicle. Ford also acknowledged that there could be additional charges and cash expenses totalling up to US$1.5 billion.
Ford's decision to cancel the production of its planned electric SUV appears to be influenced by several factors. One significant factor is the softening demand for electric vehicles (EVs). According to AAA, nearly two-thirds of potential car buyers are unlikely to purchase an EV for their next vehicle. The high cost of EVs compared to their gas counterparts and the fear of running out of charge before reaching a charging station, known as range anxiety, are contributing factors to the lower demand.
Additionally, Ford cited stiff competition in the EV market, particularly from Chinese automakers, and the price sensitivity of EV consumers as reasons for their pivot away from all-electric SUVs. The company also mentioned the numerous new electric vehicle choices entering the market and the rising compliance requirements, which have amplified pricing pressures.
Despite cancelling the all-electric SUV, Ford remains committed to creating a competitive and profitable electric vehicle business. The company plans to launch an electric commercial van in 2026 and two new pickup trucks in 2027, including a mid-sized electric pickup with a more affordable price point.
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Ford shifts focus to gas-powered pickup trucks
Ford Motor Company has decided to shift its focus to gas-powered pickup trucks, cancelling its plans for electric vehicles (EVs). This decision comes as a surprise to the industry, as Ford was an early adopter of EV production. The company has cited profitability as the main reason for this change, as the demand for EVs is not meeting projected forecasts. While Ford still intends to produce EVs, it has announced that it will shift production at its Oakville, Ontario factory in Canada from electric sports vehicles to gas-powered pickup trucks.
This decision has sparked concerns about the impact on planned electric battery production facilities in Kentucky and the future of electric vehicles in the US. The Biden-Harris administration remains committed to increasing EV production and has pledged almost $2 billion in support. However, Ford's move indicates that we are still far from a widespread adoption of electric vehicles.
The cancellation of Ford's EV production plans has also raised questions about the future of its Model e programme, which mandated that dealerships wanting to sell EVs make significant investments in charging infrastructure and customer service improvements. The programme has had a substantial financial impact on Ford, with losses of $4.7 billion in 2023 and expected losses of $5-5.5 billion in 2024.
Despite these setbacks, Ford is not completely abandoning its EV ambitions. The company has stated that it will continue to invest in EV technology and has rescheduled the launch of its electric truck from 2025 to 2026. Additionally, Ford plans to build more software into future vehicles to create "personalized digital experiences" and generate profit. While Ford scales back its EV production in the near term, it remains to be seen how this decision will affect the overall electric vehicle market and the environment.
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Demand for electric vehicles is not meeting projected forecasts
In 2024, Ford announced it would be cancelling its electric vehicle (EV) production in favour of more profitable internal combustion engine (ICE) vehicles. This decision came as a surprise to the industry, as Ford had been a prominent advocate for EV technology. However, this decision can be understood in the context of the demand for electric vehicles not meeting projected forecasts.
While the demand for EVs is increasing, it is not rising as quickly as some had predicted. In May 2024, only 6.8% of vehicles sold were electric. This is concerning for the goal of reaching net-zero car pollution by 2050, as it will lead to increased air pollution in the short term. The slower-than-expected growth in EV sales has been attributed to various factors, including the high cost of EVs, the lack of charging infrastructure, and the impact of the pandemic on consumer behaviour and manufacturing capabilities.
In addition, some have criticised the focus of EV manufacturers on producing luxury vehicles with numerous high-end features, which further increases their cost. There is a demand for more affordable, no-frills EVs that can serve the basic transportation needs of the average consumer. This is especially true for those who do not require a long-range battery and are looking for a more affordable option.
Despite the slower-than-expected growth, it is important to note that the EV market is still expanding. Forecasts predict that the market will continue to grow, with passenger EV sales expected to exceed 30 million in 2027 and reach 73 million per year by 2040. This growth is driven by various factors, including advancements in technology, falling battery prices, consumer demand for greener transportation options, and government initiatives and incentives.
While the demand for EVs may not be meeting the most optimistic projections, it is still a rapidly growing market that is expected to play a significant role in the future of the automotive industry. However, to accelerate the transition to electric vehicles and meet climate targets, strong policy support and further investments in infrastructure are needed.
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Ford's EV losses in 2023 and 2024
In 2023, Ford's EV division, Model e, reported a full-year EBIT loss of $4.7 billion on sales of 116,000 EVs, or an average of $40,525 per vehicle, which was just over a third of the first-quarter loss. The revenue in the EV division totalled $5.9 billion (+12%), while the losses totalled $4.7 billion. The loss per EV rose from $32,350 in Q2 to around $36,000 in Q3. In Q4 2023, Ford Model e posted a loss of $1.6 billion, which was just as high as sales. The company's CFO, John Lawler, stated that the EV division "needs to be profitable and provide a return," but it is clear that electric vehicles will not return pretax profit margins of 8% by 2026, a target set by Ford at the beginning of 2023.
In 2024, Ford's EV business continued to face challenges. The company projected mounting EV losses for 2025, with a lower overall profitability forecast compared to 2024. While the company did meet its annual guidance for 2024, recording an annual EBIT of $10.2 billion, it faced a tougher pricing environment and planned for about a 2% lower industry pricing.
In September 2024, Ford stunned the industry by announcing its decision to cancel EV production in favour of more 'profitable' internal combustion engine (ICE) vehicles. This decision was attributed to the slowing growth rate of EV sales, which fell short of the projected forecast from auto manufacturers. Despite the losses and the shift in production, Ford CEO Jim Farley emphasised that the company is committed to the EV business and believes that its planned next generation of EVs will enable profitability in the near future.
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The future of planned electric battery production facilities
In 2024, Ford Motor Company announced plans to shift production at its Oakville, Ontario factory in Canada from electric sports vehicles to gas-powered pickup trucks, surprising many and sparking concerns about the future of planned electric battery production facilities. This decision was made due to lower-than-expected demand for electric vehicles, with Ford prioritizing profitable internal combustion engine (ICE) vehicles.
While Ford still intends to produce EVs, this move raises questions about the potential impact on planned battery production in Kentucky and the broader implications for the industry. The growth rate of EV sales has slowed, and legacy automakers like Ford and General Motors are cautious about overproduction relative to demand. This shift in strategy has prompted discussions on the future of electric battery production facilities, particularly those under construction in Kentucky.
To future-proof the energy industry, technical and process innovations, public-private partnerships, and leveraging existing infrastructure are crucial. Advanced manufacturing facilities can play a pivotal role in improving the manufacturability and scalability of next-generation batteries, with the U.S. Department of Energy (DOE) and AMMTO supporting cost reduction, increased availability, and enhanced performance. Additionally, the DOE has funding opportunities, such as the Electronics Scrap Recycling Advancement Prize (E-SCRAP), which incentivizes increasing the production and use of critical materials recovered from electronic scrap.
Overall, while the demand for electric vehicles may have temporarily slowed, the broader trend towards electrification and the need for resilient, regional battery supply chains remain. The future of planned electric battery production facilities will depend on the ability to innovate, collaborate, and adapt to meet the evolving needs of the energy industry.
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Frequently asked questions
No, Ford did not completely stop making electric vehicles. However, in 2024, the company did announce plans to shift production at its Oakville, Ontario factory from electric sports vehicles to gas-powered pickup trucks. This decision was made due to the slower-than-expected growth rate of EV sales and the high cost of producing large EV batteries.
Ford reduced its electric vehicle production in response to market demands and to focus on more profitable internal combustion engine (ICE) vehicles. The company also wanted to address issues with overproduction against demand, as the demand for electric vehicles was not meeting the projected forecast.
Ford's decision to scale back EV production, along with similar moves by other automakers, made it more challenging for the US to achieve net-zero car pollution by 2050 and led to increased air pollution concerns. It also impacted the planned electric battery production facilities and raised questions about the future of electric vehicle production in North America.
