Blue oval cans electric SUV

Ford is rebooting its electrification strategy yet again by binning plans for a three-row fully electric SUV in a shift that may cost it about U$1.9 billion – or some NZ$3.1b.

In addition, the marque will further postpone a next-generation electric pick-up and slash spending on EVs to 30 per cent of its annual capital expenditures from about 40 per cent.

The carmaker is also reviewing its battery-sourcing plans, citing the need to better compete with lower-cost Chinese competitors.

The actions amount to further pullback by Jim Farley, chief executive officer, who accelerated Ford’s shift to EVs when he took over almost four years ago. 

The blue oval incurred significant costs ramping up production as industry sales growth began to taper off, leading it to forecast that its EV unit will lose as much as US$5.5 billion this year.

Farley, pictured, is now hoping Ford can deliver EVs priced on par with traditional vehicles, including a battery-powered midsize pick-up truck due to debut in 2027, and turn a profit on these models within a year post-launch.

He says: “This is a tremendous pivot for us and we’re not going to make a tremendous pivot without doing a lot of homework to convince ourselves this is the right plan. I’m very confident.”

Electric-car criteria

Ford has responded to the slowdown in EV demand by cranking up output of petrol-electric hybrids, which have been better received by consumers. 

Farley is keen on extended-range electric vehicles (EREVs) that have taken off in China. These use a small petrol engine to keep an on-board battery charged while driving, enabling longer range.

Ford is now considering EREV technology for its next-generation three-row SUVs as it looks at offering a range of powertrain options across its range, but it has determined it couldn’t make money on an all-electric big SUV.

As a result of this change of plans, Ford will take a special non-cash charge of about US$400 million related to writing down the value of manufacturing assets it will no longer use. 

The Canadian plant where the electric SUV was going to be built is now slated to produce highly profitable, combustion engine-powered pick-ups.

Ford may also incur as much as US$1.5b in extra expenses, including cash expenditures, in future quarters as special items tied to scrapping the electric SUV and shifting powertrain options.

The company is now going to produce a new fully electric van in Ohio starting in 2026, followed by two new pick-ups the following year. 

One of the trucks will be a medium-sized model based on a platform headed up by the former engineering lead of Tesla’s Model Y. The other is a next-generation truck Ford will build in Tennessee about two years later than initially planned.

To improve the financial performance of its EV business, Ford will boost its mix of battery production in the US to qualify for manufacturing tax credits included in the Biden administration’s 2022 Inflation Reduction Act (IRA). 

The carmaker is working with one of its cell suppliers, South Korea’s LG Energy Solution, to shift some of the battery output needed for Mustang Mach-E electric SUVs to Michigan from Poland next year.

BlueOval SK, which is Ford’s joint venture with another South Korean cell manufacturer, SK On, will also start making batteries for current E-Transit vans earlier than planned – in mid-2025.

By late next year, BlueOval will produce cells for the van to be built in Ohio. Ford has found its commercial customers have been more receptive to EVs.

Low-cost batteries

Ford is on track to start making lower-cost lithium-iron phosphate, or LFP, batteries in Michigan beginning in 2026. It expects this to be the first LFP cell plant in the US and for the batteries to qualify for IRA tax credits of up to US$7,500 for consumers. 

The company pared back the planned capacity for the factory by almost half late last year.

Farley says the midsize pick-up to be powered by LFP batteries made in Michigan will be cheaper to own and operate than traditional internal combustion engine or hybrid models. “It’s a game-changing product from a cost-of-ownership standpoint.”

He has declined to say when Ford’s EV unit, called Model e, will turn a profit. Those answers may come in the first half of 2025 when the company aims to provide an update on its electrification strategy.