Ford has said it will delay $12 billion in investments in electric cars because the current generation of electric cars faces a “challenging market.”
The new plan will pause construction at some of the company’s EV factories, including a battery plant in Kentucky, executives noted Thursday during the company’s third-quarter earnings call.
Ford’s EV unit, called Ford Model e, lost $1.3 billion on an operating basis this quarter – about double the loss in the same period last year. The company’s shares fell nearly 10 percent in the hours after markets opened Friday.
The decision comes amid similar moves by other automakers to reduce spending on electric vehicle projects.
This week, Honda and GM said their $5 billion partnership to build an affordable electric car was being scrapped. GM also said this would happen reduce production of its Chevy Equinox EV, Chevy Silverado EV and GMC Sierra Denali EV.
Ford has said it will delay $12 billion in investments in electric cars because the current generation of electric cars faces a “challenging market.” Pictured is the company’s Rouge Electric Vehicle Center in Dearborn, Michigan, where the electric Ford F-150 is made
Ford CEO Jim Farley (pictured) said the company would continue to develop the next generation of electric vehicles but would respond to the market
Ford executives said Thursday during the company’s earnings call that it would scale back production of the Ford Mach-E. President Biden is pictured next to a Ford Mustang Mach-E SUV during a visit to the 2022 Detroit Auto Show
John Lawler, Ford’s chief financial officer (CFO), said the company is not withdrawing from EV investments altogether, but is delaying them.
“We are being judicious about our production and adjusting future capacity to better match market demand,” Lawler said on the call. “It’s a more challenging market.”
“We have halted some Mustang Mach-E production and we are also delaying several investments, including making a decision with SK On to delay the second Blue Oval SK JV battery plant in Kentucky,” he added .
Ford has entered into a joint venture with Korean company SK On to open two adjacent electric battery plants in Hardin County, Kentucky. Each of the two factories is expected to employ approximately 2,500 people.
The first factory is on track to start production in 2025. The second plant, which should be operational in 2026, is the one affected by Ford’s latest decision.
Lawler told investors it would also evaluate a separate facility, the BlueOval Battery Park in Michigan, to “determine the best path forward.”
“All told, we pushed approximately $12 billion in EV spend, including CapEx (capital expenditure), direct investment and expenses,” Lawley said.
Ford CEO Jim Farley reiterated that it would continue developing the next generation of electric vehicles.
“We’re really adjusting capital and timing of capital, especially around battery plants and overall manufacturing capacity,” Farley said on the call.
He assured investors that internal combustion and hybrid vehicles would still be a key focus for the company going forward and that it would use them to hedge against poor electric vehicle sales.
Ford has entered into a joint venture with Korean company SK On to open two adjacent electric battery plants (pictured) in Hardin County, Kentucky. The second will be suspended, Ford CEO said
This week, Honda and GM said their $5 billion partnership to build an affordable electric car was being scrapped. The photo shows Honda Motor President Toshihiro Mibe
GM also said this week it would reduce production of its Chevy Equinox EV, Chevy Silverado EV and GMC Sierra Denali EV (photo)
“I think we have made very good bets on ICE (internal combustion engine) and HEV (hybrid electric vehicles), in case the EV market is not as fast as we thought,” he said.
He mentioned the Ford Ranger and Everest as examples of cars that would not be electric in the near future.
The executives also pointed out that consumers are under pressure and their cars are becoming increasingly unaffordable, thanks in part to the pandemic.
“Affordability is an issue,” Lawler said. ‘Currently a car costs a consumer approximately 14% of his monthly disposable income.
“Before COVID and before inflation it was about 13 percent, so we think it will return to that. And then we think it’s going to happen in the next 12 to 18 months.”
Ford’s third-quarter earnings results came after it reached a tentative agreement with the United Auto Workers union on Wednesday that included a 25 percent pay increase for 57,000 workers over four and a half years, ending strikes in some of the largest factories.