Ford Scales Down EV Investment as Division Loses $4.7 Billion

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Ford reduced the size of an existing plant in Michigan and delayed plans for a second battery plant.

Auto manufacturer Ford has taken more than $4 billion in losses in its electric vehicle (EV) segment, with the company cutting down investments and planning only to launch Gen 2 vehicles when it “can get to a profit.”

While Ford’s Model e, the company’s EV division, saw a 12 percent increase in revenue last year, the department registered a net loss of $4.7 billion, according to the company’s earnings report released on Tuesday.

Model e was the only one out of Ford’s three divisions that registered a net loss. The two other divisions—focused on gas and hybrid vehicles as well as commercial customers—saw net income in excess of $14.68 billion. Amid EV losses, Ford has decided to scale down investments in the sector.

“We delayed our second JV [joint venture] battery plant, we reduced the size of our new LFP [lithium iron phosphate] plant in Michigan, and we did not proceed with our JV battery plant in Turkey,” Ford Chief Financial Officer John Lawler said during a Feb. 7 earnings call.

“And now, we are further adjusting installed capacity to match demand, reassessing vertical integration in new battery chemistries, adjusting Gen 2 products and potentially their launch timing to ensure they meet our criteria for profitability.”

Mr. Lawler admitted that the biggest issue facing Ford’s electric Gen 1 vehicle is that “the revenue collapsed.” He believes that EVs are not “optimized from a cost standpoint.”

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“We put them through very quickly to get to market, and, you know, you’re seeing that flow through. But I think … we have no choice. And we will continue to work on improving the cost structure of the Gen 1 vehicles,” he said.

As for Gen 2 vehicles, Mr. Lawler said that Ford won’t launch them “unless we can get to a profit and a return on that capital that we’re investing there at the pricing environment that we now understand is reality.”

For every Ford Lightning EV the company sells, “we can sell 12 ICE vehicles,” he pointed out. The disparity is true when comparing the Mach-E EV and ICE vehicles as well.

“We know that we have to have this electric vehicle business stand on its own and be profitable because we know that there are competitors out there,” he said.

“We talked about that, the Chinese as well as Tesla that are profitable. And we have to cross that fulcrum and get there. And that’s what our goal is. So it needs to be a benefit of profitable business, return on the capital, plus the compliance benefit that we get from those,” he added.

When asked whether the company is still sticking to its target of an 8 percent margin for Model e in 2026, Mr. Lawler dismissed the forecast.

“I think it’s clear, given the dynamics in the marketplace and the way the top line [has] come down significantly since we had put that out there that the 8 percent is not on in the 2026 time period … I don’t think anybody believes that by ‘26, we can bridge from here to 8 percent,” he said.

“It’s going to come down to launching our next generation of vehicles and improving the contribution margin, gross margin … on the first generation as we go through the year.”

Troubled EV Market

Mr. Lawler’s statements come as Ford recently announced it will transfer roughly 700 of its workers from the F-150 Lightning EV assembly line in Michigan to another plant to “meet demand for the popular Bronco and Bronco Raptor and the all-new Ranger and Ranger Raptor.” Bronco and Ranger are gas-powered vehicles.

In November 2023, Ford announced it was reducing EV investments by $12 billion. General Motors and Honda have already announced they are scrapping a $5 billion plan to jointly develop EVs, with GM slowing down the company’s electrification strategy.

GM is “moderating the acceleration of EV production to protect … pricing, adjust to slower near-term growth in demand, and implement engineering changes that will bolster profits,” the company’s chief financial officer, Paul Jacobson, said in October 2023.

Dealer interest in selling Ford EVs is also taking a hit. In 2022, Ford CEO Jim Farley said that two-thirds of dealers were committed to selling EVs. However, this high-interest level has since declined.

“EV adoption rates vary across the country. … As dealers have completed their own due diligence in their local markets, dealer enrollments for 2024 entry have stabilized at just over 50 percent of the network,” Ford spokesman Martin Gunsberg told The Epoch Times in December.

A survey by Gallup last year showed that most Americans aren’t “completely sold” on EVs. Among poll respondents, only 12 percent said they were “seriously considering” buying an EV.

While 43 percent said they “might consider” such a purchase in the future, 41 percent stated they “would not buy” an EV.

The idea that EVs help to address climate change “is not universally accepted by Americans,” Gallup noted. “While about four in 10 U.S. adults think using EVs helps address climate change ‘a great deal’ (12%) or ‘a fair amount’ (27%), roughly six in 10 believe it helps ‘only a little’ (35%) or ‘not at all’ (26%).”

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