Ford believes that hybrid vehicles are the future
Strategy shift and the challenge of selling an all-electric three-row SUV or plug-in hybrids to end up driving long-hybrids
The strategic shift reflects Ford’s new requirement for any vehicle to become profitable within 12 months after its launch date — a tall hurdle for an all-electric three-row SUV. Add that to an EV market that’s been cooling on the consumer side even as businesses ramp up their offerings and competitive pressures, and Ford’s leadership saw fit to change course.
The Ford vice chairman and chief financial officer said in a conference call with journalists that the three-row SUV and hybrid technologies are the best solution for those customers.
The SUV segment is seeing a lot of competition. Most of the vehicles in the future for North America will be two-row and three-row SUVs.
These SUVs will be built as hybrids instead, leading to the company taking a non-cash charge of about $400 million for the sunk costs. Ford also warned the cancellation could lead to an additional future hit of $1.5 billion.
Cox automotive’s director of industry insights said that with EV, it’s all about the battery. She said batteries account for 40% to 45% of a vehicle’s cost depending on the variables.
If you can cut the battery size on larger vehicles, like a three-row SUV, the profit profile is better. “Because … the cost of the battery is so outsized for vehicles like this.”
Streaty says the equation will change a bit as battery technology advances. She says that consumers need to get used to the idea that a bigger battery means a bigger price tag, and that they need to evaluate how much range they really need.
“That’s why I think plug-in hybrids are a good option for consumers who want to go electric, but really need to have that option to [also use] gas if they need to go on a long trip,” she said.
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As for the changes announced by Ford, the carmaker isn’t alone in adjusting its plans, Streaty said, noting that GM and Tesla have also seen production cuts.
She said that Ford had to match consumer demand with a moving target. From charging infrastructure to consumers adapting to a different car ownership experience, that is part of the range.
Noting that the Dearborn, Michigan, company is responding to market demand, chief financial officer John Lawler told reporters on a call today that Ford would be “pivoting” away from its existing electric future and instead expand its other platforms.
“What we’ve learned is that customers want choice, and so we’re providing that choice, with a full lineup of EVs, hybrid, electric, gas and diesel products,” said Lawler.
Ford’s attempt was to be “nimble” as it created a 300-person EV team to develop a low-cost EV to take on China. Ford officials revealed today that the first vehicle from the Irvine, California, skunkworks team will be a midsize pickup due out in 2027.
He said that they knew they had to change their approach after seeing what was happening in the market.
“The market is changing globally, with the Chinese at overcapacity, and so it’s all going to come down to being nimble, having a low cost and multiple low-cost platforms, and being able to adjust as we continue to develop the transition of this industry,” said Lawler.
Ford has said its three-row SUV and hybrid technologies are the best deal for customers who want to go electric. Ford’s CFO John Lawler said the company would be “pivoting” away from its existing electric future and instead expand its other platforms. He added, “What we’ve learned is that customers want choice, and so we’re providing that choice.”