In the wake of ongoing labor strikes affecting the U.S. automotive industry, major players are recalibrating their investment plans. Ford announced today that it will temporarily delay its $12 billion investment in electric vehicles, including the construction of its second battery factory in partnership with SK On.
Ford’s Chief Financial Officer, John Lawler, emphasized during the earnings conference that the company is not retreating from the electric vehicle sector. However, he and CEO Jim Farley acknowledge that as electric vehicle sales increase, consumers’ price elasticity decreases. Most consumers are reluctant to pay higher prices for electric vehicles, resulting in pricing pressures that compress profit margins and hinder the growth of Ford’s electric vehicle business.
Ford’s financial reports for the third quarter of 2023 revealed revenue of $1.8 billion in its electric vehicle division, with total sales of 48,000 pure electric vehicles, marking the best sales performance in over a year and a half. However, the company also reported record losses, highlighting the challenges of scaling production without achieving profitability.
In response to these challenges, Ford is shifting its electric vehicle strategy away from feature-centric development to prioritize cost efficiency. “Tesla actually gave us a huge gift with the laser focus on cost and scaling the Model Y,” said Ford CEO Jim Farley. With Tesla setting an industry standard, Ford’s forthcoming second and third-generation electric vehicles will build upon this foundation.
Under this cost-driven approach, Ford is reviewing its electric vehicle investment portfolio to better align with market demand. This includes scaling back production lines for certain models, suspending the joint battery factory project with SK On in Kentucky, and adjusting other electric vehicle-related investments totaling up to $12 billion.
