Ford’s Revised EV Strategy: Short-Term Setbacks, Long-Term Optimism

On August 21 Ford Motor Company announced delays and cuts in its electric vehicle (EV) strategy, raising concerns about the automaker's commitment to electrification. However, a closer look at the company's long-term plans and strategic decisions reveals a more complex picture—one that balances immediate financial realities with sustained optimism for the future of EVs.

Ford’s decision to delay the introduction of its large electric pickup truck to 2027 and cancel a planned three-row electric SUV has been seen as a significant retreat from its once-ambitious EV goals. The automaker is also reducing its planned investment in EVs from 40% to 30% of its capital budget, a move that reflects the increasingly competitive and challenging market for electric vehicles.

“The competitive nature of the market is changing globally,” Ford CFO John Lawler stated, emphasizing the need for profitability in their EV lineup. The company’s cautious approach is further evidenced by its decision to take a $400 million charge related to the canceled SUV, with potential additional expenses of up to $1.5 billion, according to a report by The New York Times.

Challenges of a slowing market

Ford's adjustments come amid a broader slowdown in EV sales growth. While the U.S. saw nearly 600,000 electric cars and trucks sold in the first half of 2024—a 7% increase from the previous year—this growth rate is a significant drop from the 46% surge in 2023. This shift has forced many automakers, including Ford, to reassess their strategies in the face of financial pressures and evolving consumer preferences.

Related:Ford Shifts Focus to Hybrids, Delays All-Electric Launch

Despite the challenges, Ford's long-term outlook remains focused on electrification. The company is pushing forward with the construction of three new battery plants in Kentucky, Tennessee, and Michigan, with production slated to begin as early as 2025. These facilities are integral to Ford's strategy, especially as the automaker shifts some EV battery production from Poland to Michigan in partnership with LG Energy Solutions, a move designed to capitalize on the benefits of the Inflation Reduction Act (IRA).

Construction on BlueOval plant in Marshall, MI in June 2024. FORD

Betting on the IRA’s longevity

While Ford’s short-term EV outlook might appear pessimistic, the company’s actions indicate confidence in the continued support of the IRA under the next US administration, despite opposition from Republican candidate Donald Trump. The IRA, which offers significant tax credits and incentives for domestically produced EVs and batteries, is seen as a cornerstone of Ford’s long-term electrification plans.

Related:Ford CEO Farley: 'Showroom Math Easier for Hybrids'

“An affordable electric vehicle starts with an affordable battery,” Ford CEO Jim Farley stated in the company’s release, underscoring the importance of IRA benefits in reducing production costs. Ford’s decision to relocate battery production to Michigan is a strategic move that aligns with the IRA’s incentives, demonstrating the company’s belief in the act’s enduring impact.

RBC Capital analyst Tom Narayan also noted the significance of this decision, stating, “We think Ford’s decision affirms something we have long been arguing—namely that undoing the IRA would be very difficult for any administration,” Narayan told Quartz.

The hybrid hedge

In addition to its EV plans, Ford is expanding its hybrid lineup, a strategy that offers a buffer against potential shifts in the political and economic landscape. The company plans to produce a hybrid version of its next-generation F-Series Super Duty pickup trucks and replace the scrapped electric three-row SUV with a hybrid model.

By diversifying its offerings, Ford aims to "future-proof this valuable franchise across all sizes with hybrid, electric, and other electrified propulsion options," as Farley explained in the release. This approach mirrors similar strategies by other automakers, such as Hyundai, which are also betting on a mix of hybrid and electric vehicles to navigate uncertain market conditions.

More slowly—but surely—is the plan

Ford's announcement may signal a more cautious approach to its electrification goals in the short term, but they also reveal a strategic alignment with long-term opportunities. The company's actions, particularly its focus on domestic battery production and hybrid expansion, demonstrate a belief in the enduring potential of electrification, even as it navigates the complexities of a rapidly evolving market.