Ford to shift EV strategy to hybrid vehicles

When it comes to selling electric vehicles, US automakers face not only consumer reluctance but rising competition from China in the international market.

For example, the Ford Motor Co is adjusting its electric vehicle strategy due to softer-than-expected demand, and canceling and postponing the production of certain models. It also expects to take $1.9 billion in related charges and write-downs.

Ford Chief Executive Officer Jim Farley said that China's EV companies have the advantage of a lower-cost supply chain and that Ford needs to find ways to lower its own costs to compete.

"We believe that the fitness of the Chinese in EVs will eventually wash over our entire industry in all regions," Farley told analysts last month.

In China, retail sales of new energy vehicles nationwide reached 878,000 units in July, accounting for 51.1 percent of the total market, according to data released by the China Automobile Dealers Association.

The electric vehicle market is rapidly evolving as Chinese competitors leverage advantaged cost structures such as vertical integration, low-cost engineering, multi-energy advanced battery technology and digital experiences to expand their global market share, Ford said in a statement released Wednesday.

The Dearborn, Michigan-based company noted that today's electric vehicle consumers are more cost conscious than early adopters, viewing EVs as a practical way to save money on fuel and maintenance, as well as time, by charging the vehicles at home.

That shift, combined with a flood of new EV options entering the market over the next 12 months, along with increasing compliance requirements, has amplified price pressures.

Ford's EV business is on pace to lose about $5 billion this year. In the three-month period ended in June, the company lost approximately $44,000 on each electric vehicle sold.

Ford said it will cut capital spending on EVs; it will now spend 30 percent of its annual capital budget to develop them rather than the current 40 percent.

Not only is Ford facing competition from China, but its American competitor in the EV market, Tesla, also has lowered its prices.

Executives have stated that the company is working to reduce losses on its current EV lineup while ensuring that future models are profitable.

The company announced Wednesday that it would cancel plans for a three-row electric SUV due to high battery costs. Instead, the company will focus on producing those vehicles as gas-electric hybrids, with more details to be revealed at a future event.

The changes will force Ford to write down $400 million of its current assets due to big electric SUVs, and it is also expected to have additional expenses of up to $1.5 billion.

"With pricing and margin compression, we've made the decision to adjust our product and technology roadmap and industrial footprint to meet our goal of reaching positive EBIT (earnings before interest and taxes) within the first 12 months of launch for all new models," Ford Chief Financial Officer John Lawler said in the statement.

The company stated that it will focus on hybrids in areas where it holds a competitive advantage — such as commercial vans, midsize and large pickup trucks, and long-range SUVs.

It plans to offer a variety of electrification options aimed at accelerating customer adoption, including lower prices and extended ranges.

Sales of gas-electric hybrids in the US jumped 35.3 percent from January through June to 715,768, eclipsing electric vehicle sales, according to The Associated Press.

"These dynamics underscore the necessity of a globally competitive cost structure while being selective about customer and product segments to ensure profitable growth and capital efficiency," the company said.

In May, the Biden administration imposed 100 percent tariffs on EVs made in China, which went into effect on Aug 1.

Agencies contributed to this story.