Nora Eckert
DETROIT, Dec 16 (Reuters) – Ford Chief Executive Jim Farley walked through Ford’s Michigan design studio on Monday afternoon and reflected on how he would waste thousands of work hours on electric vehicles that he and his team had hoped would revolutionize the U.S. auto industry.
Soon after, his company announced it would retire several of its battery-powered models and take a $19.5 billion writedown on electric vehicle-related assets. It’s the industry’s biggest EV retreat since U.S. President Donald Trump’s sweeping auto policy changes froze already cooling demand for electric vehicles.
Farley has told employees and investors for years that catching up with Tesla and China’s leading electric car makers would mean an existential struggle. Now, after losing about $13 billion on electric vehicles since 2023, Farley says the way to survive is to get rid of these unprofitable models.
“We cannot allocate money to things that are not going to make money,” he told Reuters on Monday. “As much as I love these products, customers in the U.S. are not going to pay for them. That’s the end of it.”
Farley’s anxiety reflects a broader conundrum facing auto industry executives after Trump administration policies eliminated the industry’s subsidies for electric vehicles and eased restrictions on tailpipe pollution.
Most automakers now cannot sell electric vehicles profitably or in large quantities in the United States but must sell in China, Europe and other markets to appease regulators and compete with Chinese automakers expanding globally.
That creates the challenge for Ford and other automakers to tailor distinct vehicle lines to different regions.
The approach adds to the extra costs the industry sees as a legacy of recent decades through globalization — building essentially the same cars through a common supply chain and then selling them around the world. Fifteen years ago, then-CEO Alan Mulally called the strategy “One Ford.”
Now Farley needs a lot of Fords. His company and others have been seeking partnerships to absorb the additional costs of catering to different global markets. Renault and Ford announced earlier this month that they would team up to produce affordable electric vehicles for Europe.
After announcing the partnership, Ford said on Monday it would not build the electric commercial vans it originally planned to target that market. Ford has also been looking for Chinese partners to provide electric vehicle platform technology, Reuters reported.
On the electric vehicle front, Farley hopes to take on EV giants Tesla and China’s BYD by phasing out most EV models but retaining a $30,000 mid-size electric truck set to launch in 2027, designed by a team of specialist Skunkworks in California.
“As a multinational company competing with China and other companies, we don’t have time,” Farley said.
Michael Dunn, a consultant and former General Motors executive who has worked in China for many years, said U.S. automakers have no choice but to compete overseas with Chinese and other electric carmakers while reaping U.S. profits from gasoline-powered trucks.
“Electric vehicles are not going away,” Dunn said. “So are we going to compete globally or are we going to stay at home?”
Government support to promote electric vehicle development
U.S. electric vehicle sales have fallen sharply since a $7,500-per-vehicle consumer tax credit expired on Sept. 30, a policy that Trump-backed legislation eliminated.
This and other government policies solidify the U.S.’s position as an electric vehicle laggard relative to the world’s other two largest auto markets. In China, electric cars and plug-in hybrids account for about half of sales; in Europe, the share is about 25%. After Trump’s policies took effect, U.S. sales dropped to about 5%.
Stephanie Valdez Streaty, director of automotive industry insights at Cox, said Ford’s writedown reflects a “broader industry recognition” that the electric vehicle economy still won’t work without government support.
Other automakers are grappling with brutal economic conditions.
GM took a $1.6 billion charge in October as it scaled back its electric vehicle plans and warned that more charges would follow. It is also converting an electric vehicle factory into a production center for gasoline vehicles. Citigroup analysts said they expect GM to ultimately charge less than Ford. General Motors has surpassed Ford in electric vehicle sales, although analysts estimate the company will still lose billions of dollars on electric vehicles.
GM has decried gasoline-electric hybrids as a waste of capital while tilting its lineup of about a dozen electric vehicles toward U.S. customers that were starting to gain sales momentum just before Trump’s policies took effect. Now some of GM’s biggest rivals in the U.S. — Ford and Toyota — are pushing hard on hybrids and are seeing sales grow rapidly as consumers move away from pure electric vehicles.
Even as Ford abandons most of its electric vehicle models, it has vowed that by 2030 half of its global sales will consist of electric vehicles, hybrids or so-called “extended range” electric models, which use small gasoline engines to charge larger batteries. Today, these models total 17%. If current consumer trends continue, the vast majority of these vehicles will be hybrids without charging plugs, outselling plug-ins by far.
Hybrid vehicles already account for nearly half of Toyota’s total U.S. sales, and Toyota has been heavily criticized in recent years for insisting on hybrids rather than electric vehicles. Elliot Johnson, chief investment officer of Evolve ETF, which owns Ford shares, welcomed the Detroit automaker’s move to follow Toyota’s lead.
“Hybrids are the future for traditional automakers,” Johnson said. This gives automakers an easier path for existing customers to transition to electric models at no cost.
Stellantis is trying to regain U.S. market share by focusing on hybrids and prioritizing sales of fleet vehicles. Volkswagen established Scout, an independent electric vehicle company, to enter the electric market and relied on partners Rivian and Chinese electric vehicle maker Xpeng Motors to develop software.
Representatives for Stellantis and Volkswagen declined to comment. A GM spokesman pointed out that the company had previously disclosed plans to offer plug-in hybrid vehicles. A White House spokesman did not respond to a request for comment.
Asked what factors had the biggest impact on the massive move, from waning consumer interest in electric vehicles to Trump’s policy shifts, Farley said it was difficult to place specific emphasis on any one factor. “It’s not one thing. It’s really a combination of all these factors.”
While the EV market has been tough for some time, Farley said pressure to act has increased recently.
“Over the last few months,” he said, “it’s become very clear to the team. We have to make changes.”
(Reporting by Nora Eckert in Detroit, additional reporting by Abhirup Roy in San Francisco and David Shepardson in Washington; Editing by Mike Colias, Brian Thevenot and Nick Zieminski)
