(Reuters) – Ford Motor Co took a $19.5 billion writedown as it restructures its electric vehicle business, analysts said on Tuesday, underscoring the growing challenges traditional automakers face as they contend with weakening demand and a changing regulatory backdrop.
The writedown is seen as the clearest sign yet of the auto industry’s retreat from a technology that automakers wholeheartedly embraced at the start of this decade, exacerbated by President Donald Trump’s elimination of tax credits for electric vehicles.
After the news was announced, Ford Motor Company’s stock price rose 1.3% before the market opened on Tuesday. Tesla edged down 0.6%, while General Motors was flat. U.S.-listed shares of Stellantis rose about 1%.
Washington’s actions deepened a sales slump and forced the Big Three Detroit automakers – Ford, General Motors and Chrysler owner Stellantis – to cancel their ambitious electric vehicle plans in the United States and shift to producing hybrid and gasoline-powered vehicles.
“Ford’s strategic changes are a clear acknowledgment of changing market realities and consumer demands,” Morgan Stanley analysts said.
Morgan Stanley said the charges “represent a painful reset for the company” but are critical to aligning with consumer interests, which will ultimately boost Ford’s profitability and returns.
U.S. electric vehicle sales fell about 40% in November after the $7,500 consumer tax credit expired on September 30. The incentive has been in place for more than 15 years to stimulate demand.
Since September, Ford shares are up 14%, General Motors shares are up 34% and Tesla shares are up about 7%.
GM took a $1.6 billion charge in October as it adjusted its plans for electric vehicle plants and warned that more charges could come in the future. Stellantis has also scrapped some electric vehicle plans, canceling a scheduled electric Ram pickup truck in favor of hybrid vehicles.
“This move by Ford was to be expected (as should other companies) given the new reality of a significantly weaker U.S. EV environment due to weak demand and significantly lower compliance requirements,” Barclays analysts said.
However, they added that it was a step in the right direction and could help Ford boost profits.
(Reporting by Kanchana Chakravarty in Bengaluru; Editing by Maju Samuel)
