In a surprising turn of events, Ford Motor Company has decided to abandon its plans to manufacture a three-row electric sports utility vehicle (SUV) and will instead produce a hybrid model. This change is a response to the lukewarm enthusiasm from car buyers towards electric vehicles and the rising competition in the market, which is pressuring manufacturers to lower prices. Ford indicated that the planned electric SUV would not have been profitable in its first year after launch, as current EV buyers are more cost-conscious compared to early adopters. With many new models expected to enter the market within the next year, pricing pressures will be significant.
The shift in strategy is projected to cost Ford up to $1.9 billion, which includes a $400 million write-down of assets related to the scrapped three-row SUVs and additional costs of up to $1.5 billion. Jim Farley, Ford’s chief executive, emphasized that reducing production costs for EV models is crucial for the company’s future, especially considering the projected loss of up to $5.5 billion on EVs this year alone.
John Lawler, Ford’s vice-chairman and chief financial officer, stated, “We’re committed to creating long-term value by building a competitive and profitable business. With pricing and margin compression, we’ve made the decision to adjust our product and technology roadmap and industrial footprint to meet our goal of reaching positive earnings before interest and tax within the first 12 months of launch for all new models.”
As part of this strategic shift, Ford will decrease the percentage of its annual capital expenditure allocated to purely electric vehicles from 40% to 30%. The company plans to launch a new electric commercial van in 2026, as business customers show a stronger interest in EVs. However, the successor to Ford’s F-150 Lightning electric truck has been postponed to the second half of 2027, from its originally scheduled launch in 2025, to leverage lower-cost battery technology.
Ford’s decision to moderate its EV growth plans in favor of hybrids reflects a broader trend among traditional automakers responding to consumer demand. The US hybrid market is both larger and growing faster than the pure-battery EV market, making it an appealing option for manufacturers.
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