Why Ford is Scaling Back Large Electric Vehicle Production

Ford is set to scale back production of large electric vehicles following a period of low demand and regulatory change under US President Donald Trump. 

The company is anticipating profits to take a significant hit as manufacturing plans quickly move away from all-electric vehicles.

It follows an industry-wide move to recalibrate EV production plans, as demand dwindles and costs rise. 

EV production costs hit Ford

Ford is anticipating a US$19.5bn dent in its profits owing to its revised plans. 

The automotive giant will no longer make a purely-electric version of the F-150 pickup truck, instead putting resources into more affordable EV models, as well as hybrid and gas-powered vehicles which are anticipated to be more profitable.

Ford cites "lower-than-expected demand, high costs and regulatory changes" as the main reasons for the change in direction. 

Plans to produce a new electric commercial van have been halted, although its existing line-up of electric vans will be maintained. A commercial van with gas and hybrid versions will be manufactured at the Ohio Assembly Plant.

By the end of the decade, Ford intends to have a a hybrid or multi-energy powertrain choice for almost every vehicle within its portfolio. 

"This is a customer-driven shift to create a stronger, more resilient and more profitable Ford," says Jim Farley, CEO at Ford.

"The operating reality has changed and we are redeploying capital into higher-return growth opportunities."

Policy changes

Ford's shifting strategy follows a a loss of federal support for the EV industry in July, when President Trump signed a bill to end the tax credit for buyers of electric cars and hybrid vehicles.

This US$7,500 credit was signed by Congress in 2008 to incentivise buyers to purchase more sustainable vehicles. President Trump's tax-cut and spending bill put an end to this support on 30 September. 

At the same time, his administration paused the fines that car companies pay for not hitting fuel-efficiency regulations. In doing this, carmakers lack incentives to manufacture more sustainable vehicles. 

As a result, demand has plummeted, with US sales of EVs falling 40% in November. 

“Rather than spending billions more on large EVs that now have no path to profitability, we are allocating that money into higher-returning areas,” adds Andrew Frick, President of Ford Blue and Model e. 

Industry-wide strategy shifts

Ford is not the only EV manufacturer changing tack following the regulation changes, with many others scaling back on their EV production and moving towards gas and hybrid vehicles instead.

In October, General Motors adjusted its EV factory plans and said it would take a US$1.6bn hit. Stellantis has also changed EV strategy, removing plans to only produce 100% EVs by 2030, instead shifting to hybrids and gas-powered vehicles. 

Meanwhile, Hyundai has spent the last year slashing prices on its EV models, making it easier for drivers to switch to EVs.

The industry shift in EV production strategy appears to represent a step back for sustainable vehicle options, with manufacturers losing confidence in their ability to retain consumers.

The lack of Presidential support for both the industry and buyers has significantly slowed the momentum of sales, making EVs less profitable to produce and less desirable to buy across the US.