May 20, 2024

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Ford is slowing its push into electric vehicles

Ford is slowing its push into electric vehicles

Ford Motor Company on Thursday postponed production of at least two new electric vehicles and said it would focus on producing more hybrid vehicles. Its decision was the latest sign that major automakers were forced to rethink their electric vehicle strategy due to the slowdown in sales of those models.

The shift by Ford and automakers such as General Motors and Mercedes-Benz, which have also postponed their electric vehicle plans, has been largely driven by the difficulties companies face in making and selling enough electric vehicles and doing so profitably.

Sales of such vehicles are still growing, but the pace has slowed sharply in recent months, as automakers have tapped several early adopters who were willing to spend more than $50,000 on a new battery-electric vehicle. Because they are still learning how to make cars and their batteries at a lower cost, companies have not been able to introduce more affordable models.

“Many companies rushed to adopt expensive electric vehicles and there was not as big a market for them as they thought,” said Sam Abu Al-Samid, principal analyst for transportation and mobility at research firm Guidehouse Insights. “This made selling those vehicles more difficult.”

Some consumers are also reluctant to purchase electric models because they can't charge vehicles at home or worry that there won't be enough public chargers when they want to travel more than a few hundred miles.

Many car buyers interested in electric vehicles appear to be opting for hybrids, which can cost just a few hundred dollars more than similar gasoline-only models, and in some cases offer much better fuel economy. It is also easy for consumers to get used to these cars because they do not need to be connected to electricity and are fueled with fuel like traditional models.

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Andy Goodrich, a retired software engineer in Ann Arbor, Michigan, was considering buying a Tesla Model 3 or a Rivian SUV, but had concerns about finding charging stations. Ultimately, he chose the Toyota RAV4 Prime hybrid, which can travel about 40 miles on electric power alone before switching to the gasoline engine.

“I do most of my driving locally, so I can go a week or more without using any gas,” Goodrich, 72, said. “I charge in my garage overnight and I'm ready for the day. If I have to go to Grand Rapids or something, the gas engine will get me there.”

Ford said Thursday that it hopes to offer a hybrid version of every model it sells by the end of the decade. It already makes hybrid versions of two small cars — the Maverick and the F-150 — and the Escape crossover.

The company said it now plans to start manufacturing a large electric SUV at its plant in Oakville, Ontario, in 2027, two years later than it had planned. The plant Ford is building in Tennessee will begin manufacturing an electric pickup truck in 2026, a year later than originally scheduled.

“We are committed to expanding our profitable electric vehicle business, using capital wisely and bringing the right gas, hybrid and all-electric vehicles to market at the right time,” Ford CEO Jim Farley said in a statement.

Ford has set up a small team in Irvine, California — far from the company's headquarters in Dearborn, Michigan — to develop components that can be used to produce low-cost electric vehicles. This group is led by former Tesla CEO, Alan Clark.

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“We are also adjusting our capital, shifting more focus to smaller EV products,” Farley said on a conference call in February. Ford's electric vehicle business lost $4.7 billion before interest and taxes in 2023. By contrast, the division that makes gasoline and hybrid vehicles for consumers made a profit of $7.5 billion.

The slowdown in sales is also hurting the leading US electric model maker, Tesla. This week, it announced an unexpected 8.5 percent drop in sales of its electric cars in the first three months of the year.

Ford said on Wednesday that its electric vehicle sales increased by 86 percent in the quarter to 20,223 cars, but the total was far below the level the company had hoped to reach one day and came after it cut some prices.

The company sold more than 7,700 F-150 Lightning pickup trucks, its flagship electric model, during the three months. Last summer, Ford was hoping to be able to produce about 150,000 Lightnings a year. The company recently reduced Lightning production to one shift per day instead of two.

Two years ago, Ford, General Motors, Volkswagen and other automakers were planning to introduce dozens of new electric cars and trucks, anticipating that consumers would make a quick transition to electric vehicles from gasoline-powered vehicles.

But starting from the second half of 2023, electricity sales growth has declined significantly, forcing manufacturers to scale back their ambitions. Ford and General Motors have also slowed work at factories that are supposed to supply battery packs for their new electric models.

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