In a surprise move, Ford has announced that it’s putting the brakes on its all-electric three-row SUV plans, opting instead for hybrid versions. But what’s behind this strategic shift, and what does it mean for the future of electric vehicles?
Ford’s decision to stall its all-electric three-row SUV plans may come as a shock to some, but according to John Lawler, Ford’s vice chair and chief financial officer, it’s all about giving consumers what they want. “When you look at the three-row SUV, hybrid technologies or multiple propulsion technologies, for those customers, is the best solution,” Lawler said in a conference call with journalists.
The Numbers Don’t Add Up
One of the main reasons behind Ford’s decision is the high cost of producing an all-electric three-row SUV. With batteries accounting for up to 40% to 45% of a vehicle’s cost, it’s no wonder that Ford is looking for ways to cut costs. “With EVs, it’s all about the battery,” said Stephanie Valdez Streaty, director of industry insights at Cox Automotive. “Depending on the variables, batteries can account for up to 40% to 45% of a vehicle’s cost.”
But it’s not just the cost of batteries that’s the problem. Ford is also facing stiff competition in the SUV segment, with over 143 EVs in the pipeline for North America. “We’re seeing a tremendous amount of competition” in the SUV segment, Lawler said. “In fact, S&P Global … said that there’s about 143 EVs in the pipeline right now for North America — and most of those are two-row and three-row SUVs.”
A New Strategy
So, what’s Ford’s new strategy? According to Lawler, the company will focus on producing hybrid versions of its SUVs, as well as pickup trucks and commercial vans. This shift in strategy reflects Ford’s new requirement for any vehicle to become profitable within 12 months after its launch date.
But what about the cost of this strategic shift? Ford says it will take a “special non-cash charge of about $400 million for the write-down” related to manufacturing assets, with additional expenses possibly rising up to $1.5 billion.
What’s Next for Ford?
Despite the changes, Ford is still committed to producing electric vehicles. The company will continue to sell its current fully electric vehicles, including the Mustang Mach-E and the F-150 Lightning pickup, along with commercial vans. But will it offer plug-in hybrid SUVs in the future? Only time will tell.
Expert Insights
According to Streaty, the shift from full EV to hybrid offers more wiggle room for carmakers. “When you can take down the battery size, whether it’s a plug-in or some type of extended-range type vehicle — on these larger vehicles, like a three-row SUV, the profit profile is better,” she said.
But what about consumer demand? Streaty says that while there’s still demand for electric vehicles, the pace of growth has slowed down. “We had a record quarter last year for EVs in the U.S., but the pace of growth is slowed down,” she said.
The Future of Electric Vehicles
So, what does the future hold for electric vehicles? According to Streaty, carmakers like Ford must track a moving target as they try to match consumer demand. “We’re going to have ups and downs,” she said. But one thing’s for sure: the transition to electric vehicles won’t be easy, but it’s an important step towards a more sustainable future.
