The reality of electric vehicle prices has finally caught up with the venerable US automaker Ford, which said yesterday that it's rethinking its loss-making EV strategy.

The news came during Ford's Q4 2023 earnings call yesterday, and included revelations that the Detroit-based biz was also reassessing its EV battery strategy, a decision that comes as no surprise in the wake of delays announced last year. 

"We delayed our second joint venture battery plant in Kentucky. We reduced the size of our new lithium iron phosphate plant in Michigan, and we did not proceed with our JV battery plant in Turkey," Ford CFO, John Lawler, said on the call.

"We are further adjusting installed capacity to match demand, reassessing vertical integration in new battery chemistries, adjusting Gen 2 products and potentially their launch timing to ensure they meet our criteria for profitability." 

Lawler said much of the decision is due to a drive to reduce capital expenditure in Ford's EV division, named Model e. which he expects to eat up around 40 percent of this spending in the coming year. 

"As we continue to adjust to market dynamics, we are scrutinizing every dollar and will continue to drive efficiencies, targeting to land at the lower end of our CapEx range," Lawler said.

Despite an overall increase in revenue of 12 percent and year-end profits of $4.3 billion, Ford's EV division lost almost $4.7 billion, Lawler said. 

Ford CEO James Farley laid much of the blame for the losses on EV pricing - a known sticking point for consumers unwilling to pay thousands more for a vehicle while inflation is up and interest rates remain. high 

"Relative to EVs, there's a lot we can do, and there's a lot we're doing. I think you're going to see a lot of seismic changes in the industry because of this pricing power reality that we've all faced," Farley said on the call. "It's on us to get the cost right. That is the issue with the transition." 

While Ford's overall performance beat Wall Street expectations for the quarter, this isn't the first time we've heard negative news for the Model e division. On last quarter's call in October, Lawler said that Ford was delaying $12 billion in EV investment "given the dynamic EV environment," and a need to adjust costs.

Lawler shared another way Ford planned to hold back and watch the market: Delaying the rollout of its second generation of EVs. 

"Our Gen 2 vehicles won't launch unless we can get to a profit and a return on that capital that we're investing there at the pricing environment that we now understand is reality," Lawler said. "We know that we have to have this electric vehicle business stand on its own and be profitable because we know that there are competitors out there." 

Lawler also rescinded previous guidance that Ford's EV division would hit an 8 percent margin by 2026, telling investors he "[doesn't] think anybody believes that by 2026, we can bridge from here to 8 percent." 

Ford appears to be pinning its short-term hopes on hybrid electric vehicles, sales of which it expects to grow 40 percent in 2024. Despite all the electric doom and gloom, Ford said it's still committed to EVs, and that it expects the Model e business will grow in 2024, too. 

"We know that we have to have this electric vehicle business stand on its own and be profitable because we know that there are competitors out there," he said. "We talked about that the Chinese as well as Tesla that are profitable, and we have to cross that fulcrum and get there."

https://www.theregister.com//2024/02/07/ford_ev_strategy/