Ford Motor Company announced that it is recalibrating its EV strategy over concerns about profitability, including scrapping an electric SUV.
Ford is canceling plans to manufacture a large, three-row electric SUV.
Ford chief executive officer Jim Farley said, "We loved our three-row crossover and I was so excited to show everyone the work we did. But there was just no way it would ever meet our criteria of being profitable.”
Ford will reduce future capital expenditure plans on pure EVs from 40% to 30%
Ford now plans to leverage hybrid technology for its next-generation three-row SUVs.
Ford forecasts smaller, cheaper EVs as the future, while hybrid technology will be utilized for powering larger vehicles.
“This is about us being nimble and listening to responses from our customers,” Ford vice chairman and CFO John Lawler said in a call on Wednesday. "Hybrid tech for those customers is the best solution."
Lawler added, "We've been out in the [EV] market here for over two years, and we’ve learned a lot, and what we’re understanding is that customers want more electrification choices.”
Lawler noted that Ford will reduce future capital expenditure plans on pure EVs from 40% to 30%. He did not provide a timeline for the reduction in fully electric vehicles.
"As we’ve learned in the marketplace, and we’ve seen where people have gravitated, we’re going to focus in where we have competitive advantage, and that’s on commercial land trucks and SUVs," Lawler stated.
Farley said in an interview, "This is a tremendous pivot for us, and we’re not going to make a tremendous pivot without doing a lot of homework to convince ourselves this is the exact right plan. I'm very confident.”
The Blue Oval said on Wednesday in a press release that the cancellation would cause Ford to take a special non-cash charge of about $400 million for writing down the value of manufacturing assets it will no longer use.
Ford also admitted that the strategy of embracing hybrids over fully electric cars could cost the company as much as $1.5 billion in additional expenses and cash expenditures.
Ford's EV division is on pace to lose as much as $5.5 billion this year, according to a Thursday report by Bloomberg.
Bloomberg reported in May, citing sources, that Ford was losing $100,000 for every electric car it delivered in the first quarter of 2024.
Ford also announced this week that its upcoming pickup truck, codenamed "T3," will be delayed two years to debut in 2027. The T3 pickup will be manufactured at Ford's $5.6 billion BlueOval City production facility in Tennessee, which is expected to open in 2025.
Ford stated that it still plans to introduce an all-new fully electric commercial van that will begin production in Ohio in 2026.
The car company said it plans to move some battery production next year for the Mustang Mach-E electric SUV from Poland to Holland, Michigan, to qualify for Inflation Reduction Act manufacturing tax credits.
"An important enabler to achieving that profitability is around the mix of the battery production that’s in the U.S. that’s going to qualify for the advanced manufacturing tax credit," Lawler explained. "That’s going to be a big part of our walk to profitability."
Last year, the U.S. Department of Energy Department announced it had given a $9.2 billion conditional loan to a joint venture of Ford Motor and South Korea's SK On to build three battery plants in Tennessee and Kentucky.
Ford expects to begin manufacturing lower-cost lithium iron phosphate, or LFP, batteries at the BlueOval Battery Park plant in Michigan starting in 2026.
Farley said the LFP battery will power their upcoming all-electric midsize pickup and would be cheaper to own and operate than a traditional internal combustion engine or hybrid model.
"It's a game-changing product from a cost-of-ownership standpoint," Farley declared. "If you are not competitive on battery cost, you are not competitive."
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