In a surprising move, American automaker Ford has decided to put the brakes on its ambitious $12 billion investment plan for electric vehicles (EVs), including a battery factory in Kentucky, USA. This decision came in light of the company’s acknowledgment that consumers remain hesitant to pay a premium for EVs compared to traditional gas or hybrid vehicles.
During Ford’s third-quarter earnings call, CEO Jim Farley and CFO John Lawler recognized that while the sales of electric vehicles have been on the rise, the market is not yet prepared to bear the extra cost associated with EVs. This realization prompted the automaker to reassess its EV strategy.
Ford’s EV division has been facing financial challenges, with a substantial loss of approximately $1.3 billion in adjusted earnings during the September quarter alone. Over the course of this year, the company has accumulated losses of $3.1 billion related to its EV investments and is projected to end the year with a staggering $4 billion in losses.
John Lawler, Ford’s CFO, stated, “All told, we have pushed about $12 billion of EV spend, which includes capex, direct investment, and expense.” He also emphasized that the success of their EV transition hinges on the upcoming generation 2 and generation 3 products, which are designed to be cost-optimized and incorporate valuable lessons learned from their initial generation of EVs currently available in the market.
Ford’s leadership acknowledges that producing a compelling product is no longer sufficient in the competitive EV market. “We have to be totally competitive on cost,” Lawler noted. The company credited Tesla for its pivotal role in setting the standard for cost-efficiency and scalability, which has spurred Ford to make significant progress in the development of its second- and third-generation EVs.
On a more positive note, Ford reported a net income of $1.2 billion in the third quarter, a significant turnaround from the $827 million loss during the same quarter in the previous year.
Notably, Ford is not the only automaker adjusting its EV production plans due to market realities. General Motors is also reportedly delaying the production of new electric trucks and SUVs, highlighting the challenges faced by traditional car manufacturers in transitioning to electric vehicles.