Ford Motor has taken a pivotal step by announcing plans to reduce its expenditures on pure electric vehicles, a strategy that could potentially cost the automotive giant up to $1.9 billion. This decision reflects the company's need to adapt to changing market dynamics while catering to the growing demand for hybrid models.
The decision comes as Ford confirms that it will no longer proceed with the production of its previously delayed three-row all-electric sport utility vehicle, pivoting instead to enhance its hybrid offerings in the SUV segment. With this strategic shift, Ford is set to incur an approximately $400 million write-down relating to certain manufacturing assets earmarked for the electric SUV.
Additionally, the company anticipates further expenses that could total as much as $1.5 billion. Such costs will be recorded as special items for the fiscal quarter when they are incurred. In total, Ford plans to slash its annual capital expenditures allocated for pure electric vehicles from about 40% down to 30%.
This reduction aligns with the company's broader vision of creating long-term value through a competitive and profitable operational model. Chief Financial Officer John Lawler articulated the necessity of this restructuring, stating, "We're committed to creating long-term value by building a competitive and profitable business.
With pricing and margin compression, we've made the decision to adjust our product and technology roadmap and industrial footprint to meet our goal of reaching positive earnings before interest and taxes within the first 12 months of launch for all new models." Central to these adjustments is a planned alteration in the cadence of product launches and a reassessment of battery sourcing strategies.
Lawler highlighted the importance of increasing the share of battery production in the United States, which qualifies for the Advanced Manufacturing Tax Credit, calling it a crucial factor for enhancing profitability. The evolving electric vehicle market poses new challenges for Ford, particularly as Chinese competitors leverage unique cost advantages that include vertical integration, economical engineering, advanced multi-energy battery technology, and enhanced digital experiences to capture a larger share of the global market.
This competitive landscape has also altered consumer psychology; today's EV buyers are increasingly mindful of costs compared to those early adopters who took the plunge without price concerns. To navigate these market changes, Ford has made the decision to delay the launch of its much-anticipated electric pickup truck, Project T3, until the latter half of 2027.
This delay allows the company to incorporate less expensive battery technologies, shifting the previous plan that targeted customer deliveries in 2026. Furthermore, Ford is set to introduce a mid-sized electric pickup in 2027, which the company asserts will be the first affordable model stemming from its new electric vehicle platform developed in California. As commercial clients are adapting more swiftly to electric vehicles, Ford has outlined plans to commence the assembly of a new electric commercial van in 2026, with battery cell production expected to kick off by late 2025.
Importantly, these cells will also power the Project T3 pickup, suggesting a strategic sharing of components that will provide Ford with substantial sourcing flexibility across its various manufacturing segments and electrified platforms. "An affordable electric vehicle starts with an affordable battery," asserted Chief Executive Jim Farley, emphasizing the company's commitment to making electric mobility attainable for all. Current Stock Price: $10.88, Change: +0.20, Percent Change: +1.87.