The lack of profitability and the recent decline in demand continue to discourage legacy carmakers from going all-electric.
Ford is reshuffling its EV plans and focusing on hybrid cars instead. The American auto giant is coming to terms with the fact that the growth of the EV industry has been slower than anticipated. On top of that, it is losing insane money on every EV it is selling. With aggressive competition from Chinese carmakers, the need to develop low-cost electric cars is essential. In fact, that is what led to the creation of the relatively clandestine ‘Skunkworks’ department of Ford. It was working on a low-cost EV platform to spawn future EVs.
Ford to Focus on Hybrid Cars
As per recent information, Ford has axed its upcoming large 3-row electric SUV and has delayed the production of its electric pickup truck from 2025 to 2027. That is a clear indication of what the Blue Oval is concentrating on now. Instead of going gung-ho on EVs, they are trying to come up with hybrid cars. They believe that it will serve as an effective method during this transition phase from ICE to electric. As a matter of fact, Ford is in the process of reducing its annual budget for pure EVs from 40% to 30%. Not only that, it could even lose a whopping $1.5 billion in the future due to this decision.
As per Wired, Chief Financial Officer John Lawler told reporters on a call, “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. We’re going to continue to provide gas vehicles and diesel vehicles because there’s a demand for those and that’s going to continue. Our focus here is to remake Ford into a high growth, higher margin, more capital, and an efficient and durable business.” It is evident from these comments that the American auto marque will be making all sorts of powertrains for the next few years.
Our View
The fact that one of the largest carmakers in the world is struggling with EVs represents just how complex the situation is. In recent months, the demand for electric cars has been lower than what the industry was expecting. Hence, the initial surge, of sorts, seems to be over. Going forward, affordability looks like the only way to expand. However, that crushes the profit margins of companies which is why they are reconsidering their stance on going fully electric. I shall keep an eye out for more developments in this regard.
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