ford is making a U-turn in its electric car strategy, writing off $19.5 billion and discontinuing several electric models. The US car manufacturer announced this on Monday. Investors reacted calmly to the radical shift in strategy: the company’s shares were recently slightly higher.
The write-downs of almost $20 billion are among the largest write-downs ever made by a company and are seen as a clear signal that the US auto industry’s electric car plans cannot be implemented in the short term.
“Instead of pouring billions into the future, even though we know these big electric vehicles will never make money, we are changing course,” said Ford CEO Jim Farley (63) in an interview with the Wall Street Journal (WSJ). “We now know enough about the US market to act with significantly greater confidence in this second phase of lower-emission drive technologies,” said Farley.
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“Big electric cars don’t make money”: Ford CEO Jim Farley is turning the automaker’s strategy inside out
Photo: Tom Nicholson / REUTERS
Since 2023, Ford has made a loss of almost $13 billion in its electric car business. The company said it will now expand its range of petrol engines again and focus more on hybrid vehicles and so-called extended-range electric vehicles. The capital that was originally earmarked for electric vehicles will be redirected into more profitable models.
Focus on hybrid version
Specifically, Ford will stop producing the F-150 Lightning pickup truck as a purely electric vehicle. Instead, it will focus on producing a hybrid version with a range extender, a gasoline-powered generator that charges the battery, it said on Monday. In addition, a planned next-generation electric truck codenamed T3 and electric commercial vehicles will be canceled.
The F-150 Lightning was launched in 2022, but after an initial 200,000 orders, sales fell. With the announcement, Ford is discontinuing virtually all of its announced second generation of electric cars and shifting the focus to more affordable electric models that are scheduled to hit the market starting in 2027. Farley told the WSJ that the high cost of batteries on F-150 trucks has proven to be an insurmountable obstacle. In combination with the waning electric car boom after the pandemic and the special expectations of truck customers, Ford’s original strategy ultimately failed.
Farley emphasized that Ford is better positioned with a mix of different drive technologies than with a one-sided strategy. “This is a better solution for customers,” he said, because “none of us really know what the future will look like – but Ford knows enough to know that this mix is the right one.” The company said it wants to make half of its sales from hybrid, electric and extended-range models by 2030. The proportion is currently just under 17 percent.
$6 billion for failed battery factory
The depreciation of $19.5 billion will be recorded mainly in the fourth quarter and extends until 2027. Around $8.5 billion is attributable to the canceled electric car models, around six billion to the dissolution of a battery joint venture with SK On from South Korea and five billion to other project-related expenses.
The Ford and SK On battery complex was intended to give Ford’s electric strategy a boost, but was never able to meet expectations: one plant never went into operation, the other only ran to a limited extent for the electric F-150. Now Ford wants to use the site for stationary energy storage, such as data centers, instead of for electric car batteries. Other car manufacturers and battery manufacturers are also increasingly focusing their battery projects on this market.
While there will be layoffs at the battery plant in the short term, in the long term Ford wants to hire thousands of employees to produce gasoline and hybrid models. At the same time, the group raised its forecast for adjusted earnings before interest and taxes for 2025 to around seven billion dollars.
Trump administration relies on combustion engines
Ford’s realignment reflects this Industry reaction to a declining demand in the USA and the policies of the President’s administration Donald Trump (79). The administration of Trump’s predecessor Joe Biden (83) had tried to encourage the auto industry to quickly switch to electric vehicles, but encountered resistance from many Republicans. This year, the Trump administration rolled back some of the country’s toughest air pollution and fuel economy regulations. On September 30, the government also phased out a $7,500 consumer tax credit that had existed for more than 15 years.
Many buyers have so far avoided electric cars due to high purchase costs, concerns about the range being too short and the inadequate charging infrastructure. Sales of electric cars in the US fell by about 40 percent in November.
While this mix of restrained demand and relaxed regulations allowed US manufacturers to adapt their electric strategies more freely, it also forced them to make significant write-downs on their investments in electric mobility. General Motors recently abandoned its goal of only building electric vehicles from 2035 and took write-offs of $1.6 billion on electric assets in the third quarter.
More on the topic
Ford is now focusing on small electric cars and vans and is cooperating with Renault. The companies presented their cooperation at the beginning of December as a response to growing Chinese competition. “We are fighting for our survival and our industry,” explained Farley in Paris.