Ford Motor is changing its EV strategy. In addition toIn addition to the cancellation of its all-electric three-row SUV, which has already been significantly delayed, Ford will further postpone the launch of its next-generation electric pickup truck. In addition, the company will reduce its spending on the development of the electric vehicle sector. Currently, spending on the EV sector will be at the level of 30% of the company’s annual capital expenditure, while previously the electric car sector accounted for about 40% of the annual investment budget, Bloomberg reported.
Ford also announced on Wednesday that it is changing its battery sourcing plans to meet Chinese competition in the battery industry.
The market has slowed down Ford
When CEO Jim Farley took over nearly four years ago, he initially accelerated Ford’s transition to electric vehicles and increased production. But the company has suffered significant losses as demand for electric vehicles has fallen around the world in recent days. Ford is forecasting that its electric vehicle unit will lose as much as $5.5 billion this year.
Ford’s electric vehicle business has been steadily losing money, with the automaker forecasting a deficit of up to $5.5 billion this year / Bloomberg
Ford responded to slowdown in EV demand increasing production of hybrid gas-electric models, which have been better received by consumers.
Farley now predicts that Ford could produce electric vehicles that are priced similarly to traditional vehicles. The new battery-powered vehicles include a midsize pickup truck that is set to debut in 2027. The new models are expected to turn a profit within a year of launch.
Farley is particularly pleased with hybrids called extended range electric vehicles, or EREVswhich have gained popularity in China. These vehicles use a small petrol engine to charge an on-board battery while driving, allowing for greater range.
Large SUV with different drive, cost of change $1.9 billion.
Ford ultimately concluded that it would not make money on an all-electric large SUV, so is currently considering extended-range EV technology for its next-generation three-row SUVs.
As a result of the change of plans Ford will incur a special non-cash charge of approximately $400 million related to the write-down of manufacturing assets that it will no longer use. The Canadian factory that was supposed to build the electric SUV has now produce highly profitable pick-up trucks with internal combustion engines. In addition, the car manufacturer may also be liable additional expenses of up to $1.5 billionincluding special expenses related to the cancellation of the electric SUV and changing the powertrain option to an EREV.
While the electric SUV will be sidelined, Ford plans to produce a new all-electric commercial van in Ohio starting in 2026, followed by two new pickups in 2027.
Batteries a chance to improve Ford’s EV sector results
To improve the financial performance of its EV business, Ford will increase its U.S. battery production footprint to continue to qualify for manufacturing tax credits included in the Biden administration’s Inflation Reduction Act of 2022.
According to Bloomberg, the carmaker is working with one of its cell suppliers (South Korean LG Energy Solution) to next year, move some production of batteries needed for the Mustang Mach-E electric SUV from Poland to Holland, Michigan.
BlueOval SK, Ford’s joint venture with another South Korean cell maker, SK On, will begin production of batteries for current E-Transit vans in mid-2025.
Ford is on track to start producing cheaper lithium iron phosphate, or LFP, batteriesin Michigan starting in 2026. The automaker expects it to be first LFP cell factory in the US. The producer expects that batteries LFP with Michigan will qualify for tax credits of up to $7,500 for consumers.
Farley said the midsize pickup, which will be powered by a Michigan-made LFP battery, will be cheaper to own and operate than a traditional combustion engine or hybrid model.
