Ford cancels electric SUV, cuts spending on all-electric vehicles to focus on hybrids after EV losses

Ford Motor Company has announced it is recalibrating its electric vehicle strategy due to concerns about profitability, including abandoning an electric SUV.

Ford cancels plans to build a large three-row electric SUV.

Ford CEO Jim Farley said: “We loved our three-row crossover and I couldn’t wait to show everyone the work we’d done. But there was no way it was going to meet our cost-effectiveness criteria.”

Ford to cut future investment plans for pure electric vehicles from 40% to 30%

Ford now plans to leverage hybrid technology for its next-generation three-row SUVs.

Ford predicts that the future will be marked by smaller, cheaper electric vehicles, while hybrid technology will be used to power larger vehicles.

“It’s about being agile and listening to our customers,” John Lawler, Ford’s vice president and chief financial officer, said on a conference call Wednesday. “Hybrid technology is the best solution for those customers.”

Lawler added: “We’ve been in the electric vehicle market for over two years and we’ve learned a lot. We understand that customers want more choice when it comes to electrification.”

Lawler said Ford would cut its future capital spending plans on pure electric vehicles from 40% to 30%. He did not provide a timeline for the reduction in all-electric vehicles.

“As we’ve learned in the marketplace and seen where people have gone, we’re going to focus on areas where we have a competitive advantage, which is commercial overland trucks and SUVs,” Lawler said.

Farley said in an interview: “This is a tremendous change of direction for us, and we’re not going to do it without doing a lot of research to convince ourselves that this is exactly the right plan. I’m very confident.”

Blue Oval said in a news release Wednesday that the cancellation would require Ford to take a special non-cash charge of about $400 million to reduce the value of manufacturing assets it will no longer use.

Ford also admitted that the strategy of moving to hybrid vehicles instead of fully electric cars could cost the company up to $1.5 billion in additional expenses and cash burn.

Ford’s electric vehicle division is on track to lose as much as $5.5 billion this year, according to a report from Bloomberg on Thursday.

Bloomberg reported in May, citing sources, that Ford was losing $100,000 for every electric car delivered in the first quarter of 2024.

Ford also announced this week that its next pickup, codenamed the “T3,” will be delayed by two years to debut in 2027. The T3 pickup will be built at Ford’s $5.6 billion BlueOval City, Tennessee, manufacturing plant, which is scheduled to open in 2025.

Ford said it still plans to introduce an all-new, all-electric commercial van with production starting in Ohio in 2026.

The automaker said it plans to move some battery production for the Mustang Mach-E electric SUV from Poland to Holland, Michigan, next year to take advantage of manufacturing tax credits under the Inflation Reduction Act.

“A major factor in achieving this profitability is the mix of U.S. battery production that will be eligible for the Advanced Manufacturing Tax Credit,” Lawler said. “That will play a significant role in our path to profitability.”

Last year, the U.S. Department of Energy announced a $9.2 billion conditional loan to a joint venture of Ford Motor and South Korea’s SK On to build three battery factories in Tennessee and Kentucky.

Ford plans to begin making lower-cost lithium iron phosphate, or LFP, batteries at its BlueOval Battery Park plant in Michigan starting in 2026.

Farley said the LFP battery will power their upcoming all-electric midsize pickup and would be less expensive to own and operate than a traditional internal combustion engine or hybrid model.

“It’s a revolutionary product in terms of cost of ownership,” Farley said. “If you’re not competitive in terms of battery cost, you’re not competitive.”

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