US carmaker to focus on segments where it is already strong: pickup trucks and commercial vehicles
21 August 2024 - 21:12
byReuters
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A man removes the charging cable from a Ford E-Transit in London, Britain, February 9 2023. Picture: REUTERS/PETER NICHOLLS
Detroit — Ford on Wednesday said it was killing a planned three-row electric SUV and pushing back a new electric version of its best-selling pickup, the F-150, in the latest delay by the US automaker as it focuses on cutting costs to stimulate demand.
Ford, General Motors and other carmakers have delayed or cancelled new electric models to avoid spending heavily on vehicles that consumers are not buying as quickly as anticipated.
“With pricing and margin compression, we’ve made the decision to adjust our product and technology road map and industrial footprint to meet our goal of reaching positive ebit (earnings before interest and tax) within the first 12 months of launch for all new models,” CFO John Lawler said in a statement.
Ford also said it is adding a new electric mid-sized pickup and van to its future line-up as it doubles down on a strategy it has used in recent years, focusing on segments where it is already strong: pickup trucks and commercial vehicles. Ford shares rose 1.1%.
Hybrid sales
The Dearborn, Michigan-based vehicle maker has instead thrown more investment into hybrid vehicles, which combine an electric motor with a petrol engine. Hybrid sales by Ford, Toyota and other carmakers have surged as consumers turn to the technology as a less costly halfway step between petrol-powered cars and electric vehicles (EVs).
“The criticism Ford will have to face is why its product plan wasn’t more flexible from the beginning, why it has been slow to implement these changes, and why investors will need to wait for a comprehensive update until next year,” Bernstein analyst Daniel Roeska said in a research note.
Ford CEO Jim Farley has said one of the main solutions to slowing EV sales growth is bringing the production costs down for those models. That’s a key goal for the health of the company, which is expected to lose as much as $5.5bn on EVs this year alone.
As Chinese competitors and Tesla continue to drive down costs on EV production, Farley has said he is staking the future of Ford on its specialised team in California, which has been developing an architecture for affordable EVs. The first vehicle based on that new technology will be the mid-sized electric pickup released in 2027.
The automaker will take a special non-cash charge of about $400m for the writedown of certain assets for the previously planned three-row SUVs, which may also result in additional expenses and cash expenditures of as much as $1.5bn.
Given the increasing emphasis on hybrids, Ford said its share of annual capital spending dedicated to pure EVs will decline to about 30% from 40%.
‘Affordable battery’
Ford said it will start making an electric commercial van at its Ohio Assembly plant in 2026, hoping to capitalise on its success in the gas-engine commercial vehicle market. Meanwhile, the long-awaited successor to Ford’s F-150 Lightning electric truck is again delayed, now to the second half of 2027 from an initially planned 2025 launch, a move the company said will allow it to take advantage of lower-cost battery technology.
While Ford is shelving plans to produce an electric three-row SUV, it is moving to hybrid vehicles in that segment, aiming to woo customers with longer-range vehicles for road trips.
Ford also said it will relocate some battery production to qualify for incentives under the US Inflation Reduction Act and further drive down costs, a top priority for Farley.
The carmaker will move some production of the batteries it makes with South Korean battery partner LG Energy Solution for its Mustang Mach-E cars from Poland to Holland, Michigan.
“An affordable electric vehicle starts with an affordable battery,” Farley said in the statement.
Another battery joint venture, with SK Innovation in Kentucky, will begin manufacturing cells for the E-Transit van beginning in mid-2025 and batteries for Ford’s new electric commercial van in Tennessee in late 2025.
The automaker said lithium iron phosphate (LFP) battery production is on track to begin in 2026 at its battery park in Michigan and will qualify for IRA benefits.
Ford licenses technology from Chinese company CATL for its LFP batteries, an agreement that has come under heavy criticism from some legislators. The terms of that agreement are unchanged, a Ford spokesperson said.
Ford said it will provide an update on electrification, technology, profitability and capital requirements in the first half of 2025.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Ford halts plan for electric SUV on low demand
US carmaker to focus on segments where it is already strong: pickup trucks and commercial vehicles
Detroit — Ford on Wednesday said it was killing a planned three-row electric SUV and pushing back a new electric version of its best-selling pickup, the F-150, in the latest delay by the US automaker as it focuses on cutting costs to stimulate demand.
Ford, General Motors and other carmakers have delayed or cancelled new electric models to avoid spending heavily on vehicles that consumers are not buying as quickly as anticipated.
“With pricing and margin compression, we’ve made the decision to adjust our product and technology road map and industrial footprint to meet our goal of reaching positive ebit (earnings before interest and tax) within the first 12 months of launch for all new models,” CFO John Lawler said in a statement.
Ford also said it is adding a new electric mid-sized pickup and van to its future line-up as it doubles down on a strategy it has used in recent years, focusing on segments where it is already strong: pickup trucks and commercial vehicles. Ford shares rose 1.1%.
Hybrid sales
The Dearborn, Michigan-based vehicle maker has instead thrown more investment into hybrid vehicles, which combine an electric motor with a petrol engine. Hybrid sales by Ford, Toyota and other carmakers have surged as consumers turn to the technology as a less costly halfway step between petrol-powered cars and electric vehicles (EVs).
“The criticism Ford will have to face is why its product plan wasn’t more flexible from the beginning, why it has been slow to implement these changes, and why investors will need to wait for a comprehensive update until next year,” Bernstein analyst Daniel Roeska said in a research note.
Ford CEO Jim Farley has said one of the main solutions to slowing EV sales growth is bringing the production costs down for those models. That’s a key goal for the health of the company, which is expected to lose as much as $5.5bn on EVs this year alone.
As Chinese competitors and Tesla continue to drive down costs on EV production, Farley has said he is staking the future of Ford on its specialised team in California, which has been developing an architecture for affordable EVs. The first vehicle based on that new technology will be the mid-sized electric pickup released in 2027.
The automaker will take a special non-cash charge of about $400m for the writedown of certain assets for the previously planned three-row SUVs, which may also result in additional expenses and cash expenditures of as much as $1.5bn.
Given the increasing emphasis on hybrids, Ford said its share of annual capital spending dedicated to pure EVs will decline to about 30% from 40%.
‘Affordable battery’
Ford said it will start making an electric commercial van at its Ohio Assembly plant in 2026, hoping to capitalise on its success in the gas-engine commercial vehicle market. Meanwhile, the long-awaited successor to Ford’s F-150 Lightning electric truck is again delayed, now to the second half of 2027 from an initially planned 2025 launch, a move the company said will allow it to take advantage of lower-cost battery technology.
While Ford is shelving plans to produce an electric three-row SUV, it is moving to hybrid vehicles in that segment, aiming to woo customers with longer-range vehicles for road trips.
Ford also said it will relocate some battery production to qualify for incentives under the US Inflation Reduction Act and further drive down costs, a top priority for Farley.
The carmaker will move some production of the batteries it makes with South Korean battery partner LG Energy Solution for its Mustang Mach-E cars from Poland to Holland, Michigan.
“An affordable electric vehicle starts with an affordable battery,” Farley said in the statement.
Another battery joint venture, with SK Innovation in Kentucky, will begin manufacturing cells for the E-Transit van beginning in mid-2025 and batteries for Ford’s new electric commercial van in Tennessee in late 2025.
The automaker said lithium iron phosphate (LFP) battery production is on track to begin in 2026 at its battery park in Michigan and will qualify for IRA benefits.
Ford licenses technology from Chinese company CATL for its LFP batteries, an agreement that has come under heavy criticism from some legislators. The terms of that agreement are unchanged, a Ford spokesperson said.
Ford said it will provide an update on electrification, technology, profitability and capital requirements in the first half of 2025.
Reuters
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