Ford is recalibrating its electric vehicle (EV) strategy as global demand for electric cars shows signs of slowing. The Michigan-based automotive giant has scrapped plans for a major new fully electric SUV and postponed the launch of another electric pickup truck. The decision comes in response to a tightening of price competition and profitability, known in the industry as “price and margin compression.”
This strategic pivot reduces Ford’s annual capital expenditure for electric vehicles from 40% to 30% of its budget, translating into around $1.9 billion in write-offs and new expenditures. Just a few years ago, Ford had aggressive plans to push into the EV market, aiming to produce approximately two million vehicles annually by 2026.
However, despite a strong start in 2022 with the electric version of its best-selling F-150 pickup, Ford, like its industry rival General Motors, is tempering its investment and ambitions in the face of weaker-than-expected consumer demand and a preference for hybrid models that utilize both fossil fuels and battery power.
While EV sales in the U.S. have recently seen an uptick, the competition continues to exert significant price pressure on manufacturers. Last month, Ford reported over 50,000 electric vehicle sales since the start of the year, marking an increase of more than 60%. Nonetheless, the electric business has also incurred losses nearing $2.5 billion.
Adding to its strategic overhaul, Ford has announced a relocation of some of its battery production from Poland to the United States. This move aims to capitalize on government incentives offered by the Inflation Reduction Act, underscoring the company’s commitment to cost reduction and efficient production amidst a challenging market landscape.