Ford Reassesses EV Strategy Amidst Market Realities, Eyes Hybrid Focus

📝 SUMMARY: Ford Motor Company ($F) is undergoing a strategic reassessment of its electric vehicle (EV) plans, as announced by CEO Jim Farley. This revision includes a critical evaluation of the company's approach to vertical integration of batteries and a substantial reduction in EV investments, totaling $12 billion. During Ford's fourth-quarter earnings call, Farley emphasized this strategic shift, citing the need to align battery capacity and technology with market demand and profitability objectives.

The Detroit-based automaker's decision to reevaluate its EV strategy is a response to the slower-than-anticipated rate of EV sales growth. Farley pointed out that widespread adoption of EVs among mass-market consumers is contingent on the cost of these vehicles becoming more competitive with traditional, gas-powered cars. Currently, EVs tend to be significantly more expensive, which poses a barrier to their broader market acceptance.

Ford's Chief Financial Officer, John Lawler, further elaborated on the company's strategic adjustments. These include revising production capacity to better match demand, potentially delaying the launch of next-generation EVs, and ensuring that new EV models meet Ford's profitability criteria under the evolving market conditions. The company is also exploring new battery chemistries as part of its reassessment.

This strategic pivot comes against the backdrop of Ford's EV business, known as Model e, incurring substantial losses. In 2023, Model e reported a loss of $4.7 billion, including a significant $1.57 billion loss in the fourth quarter alone. These losses were somewhat offset by profits from Ford's fleet and traditional internal combustion engine units, each earning over $7 billion last year.

With the reevaluation of its EV strategy, Ford is shifting its focus towards hybrid vehicles, particularly trucks. The company forecasts a 40% increase in hybrid vehicle sales this year, building on the sale of 133,743 hybrid vehicles in the U.S. in 2023. This strategic adjustment reflects Ford's adaptation to market realities and a balancing act between advancing EV technology and maintaining financial viability.

🔍 SOURCE: https://www.cnbc.com/2024/02/06/ford-reassessing-ev-plans-including-vertical-battery-integration.html