Ford recently announced that it is revising its electrification strategy, dropping some planned all-electric models and increasing its hybrid efforts. Let’s take a look at what that entails.
The shift encapsulates all the challenges facing the U.S. auto industry as it seeks to make electrification—crucial in the fight against climate change—profitable despite consumer hesitation, supply issues and Chinese competition.
Refocusing on hybrid
Ford is abandoning its three-row electric SUV project and reducing its share of spending on all-electric, which will drop from 40% to 30% per year, which is still substantial.
Ford also announced that production of an all-electric commercial van will begin in 2026. The blue oval brand also plans to launch two other long-range electric vehicles, a pickup truck and an SUV.
Ford is recognizing consumer preferences, says CEO Jim Farley: The average motorist is turned off by the price of all-electrics and the relative scarcity of charging stations.
PHOTO REBECCA COOK, REUTERS ARCHIVES
Ford CEO Jim Farley in front of an F-150 Lightning electric pickup truck at a plant in Dearborn, Michigan, in 2022
“We have learned a lot about customer priorities and, in design, the balance between technical excellence and economic viability. Our new plan gives our customers maximum choice and plays to our strengths,” adds the Ford boss.
Ford’s next three-row SUVs will be hybrids, not all-electric. That shift will mean writing off $400 million in assets (production equipment that won’t be used, or not right away). Conversely, realigning to hybrid could involve spending as much as $1.5 billion.
We were unable to create a vehicle [électrique] that would be profitable after 12 months or less. If the consumer is not there, you have to adapt, pivot and make tough decisions. That’s what we did.
John Lawler, Ford’s chief financial officer
The announcement is a major blow to President Joe Biden’s goal of having 50% of new cars be electric or plug-in hybrids by 2030. It comes in the middle of the US election campaign, when electric cars are being heavily attacked by former President Donald Trump.
PHOTO COURTESY OF FORD
Ford’s website still proclaims that “the electric age is here,” highlighting its Mustang Mach-E, but the company is shifting its focus to producing gasoline-electric hybrid models.
“Unfortunately, that 50% by 2030 goal has always been a bit too optimistic, as have those announced by automakers including Ford, GM and Stellantis,” observes Sam Abuelsamid, an automotive analyst at Guidehouse Insights, a company that collects and sells market intelligence.
“Ford’s failure to develop a cheap, competitive and profitable electric car is likely to be a major challenge given increased competition from South Korea’s Hyundai and Kia and, in the medium term, from the Chinese,” Abuelsamid added.
Prices are falling, but not fast enough
While the price of all-electric vehicles has come down, they remain higher than their gasoline-powered rivals. Over the past two years, the average price of an electric vehicle in the U.S. has fallen by $8,500, or 13.1%, to $56,520 (before the federal tax credit, which can be as much as $7,500), according to Cox Automotive.
The average price of a new gasoline or hybrid car is around $47,800.
In my opinion, the price of electric vehicles will continue to fall.
Stephanie Valdez-Streaty, Director at Cox Automotive
The election outcome could have a big impact on the federal auto electrification program, including the tax credit of up to $7,500. On the campaign trail, Trump said he had made “no final decision” on the subsidy: “I’m a big fan of electric cars, but I’m also a big fan of gas cars, hybrids, whatever else comes along,” he said.
PHOTO TOM BRENNER, THE NEW YORK TIMES ARCHIVES
Donald Trump in 2020 in front of an electric pickup truck. He has since vowed to tear apart President Joe Biden’s electrification policy, before becoming more vague on the campaign trail.
In August, Ford also announced it was delaying production of an electric pickup truck to 2027. Production at the new $5.6 billion plant near Memphis, Tennessee, was scheduled to begin in 2025.
“This effectively pushes the entire next generation of Ford electric vehicles back to 2025 to 2027 — at a minimum,” says Corey Cantor, an automotive electrification expert at BloombergNEF, an energy information firm.
Ford’s website still proclaims that “the electric age is here,” highlighting its all-electric Mustang Mach-E and F-150 Lightning. But Ford’s electric division posted a loss of $1.1 billion, which it attributed in part to “first-generation electric vehicle pricing across the industry.” Ford’s hybrid sales, led by the F-150 and Maverick pickups, were up 34% in the second quarter of 2024 compared with the same period in 2023.
Ford will be more disciplined in the future, CEO Jim Farley said, having learned from the losses in its electric division: “We will not launch vehicles at a loss that are not good for our business, knowing what we know now about the reality of the market.”
This article was published in the Washington Post
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