Ford Motor Company is adjusting its electrification strategy with cost-cutting measures and a change in its vehicle lineup to handle reduced customer demand.
The Michigan-based manufacturer is scrapping its plan to roll out a three-row electric sport-utility vehicle and will instead be making hybrid SUV models meant to combine emissions reduction and performance. Ford is also delaying the launch of its next electric truck model to 2027, a year later than its expected release, and shifting its battery sourcing to help lower EV costs, the company announced Wednesday.
“We’re committed to creating long-term value by building a competitive and profitable business,” said Ford chief financial officer John Farley. “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 EBIT within the first 12 months of launch for all new models.”
To account for the growing demand for hybrids, Ford is reducing its capital spending on electric vehicles from 40 percent to 30 percent as it suffers billions worth of losses on its EV investments.
Industry headwinds are playing an important role in Ford’s choice to recalibrate its EV strategy. Ford is facing increased EV competition from domestic and Chinese companies combined with lower consumer demand for EVs and greater price sensitivity to EV costs.
The Environmental Protection Agency’s stricter tailpipe emissions regulations and its rules mandating electric-vehicle production have added to the pressure on car manufacturers to put more capital into electrification.
Ford plans on rolling out an electric van in 2026 that will be assembled at its Ohio plant. The company’s new electric truck model will be assembled in Tennessee and include brand-new features unique to the model.
The White House has made electric vehicles a central aspect of its climate agenda and industrial policy over President Joe Biden’s term. The Biden administration has attempted to bolster the American EV market with tax credits for domestic producers and customers who buy electric cars. On top of that, the White House has allocated billions to building a slate of EV chargers nationwide, but so far the project has mostly failed to materialize.
Ford is hoping to take advantage of those tax credits by shifting more of its batter production to the U.S., as the company continues grappling with high battery costs for its larger electric vehicles.
“An affordable electric vehicle starts with an affordable battery,” Farley said. “If you are not competitive on battery cost, you are not competitive.”