“Ford Motor’s decision this week to kill a highly touted future electric vehicle is a sign that the industry’s pullback on EVs is deepening,” writes The Wall Street Journal (Aug. 23, 2024). It is canceling plans for an electric SUV once touted as a “personalized bullet train.” The move added to the drumbeat of news from carmakers of delayed or scrapped investments into EV models, factories and battery projects.
GM, VW, Mercedes and other automakers also have curbed their EV ambitions in recent months. Taken together, the walked-back plans are an acknowledgment that the big investments outlined at the start of the decade got ahead of the consumer’s appetite for a full switch to EVs.
Delaying some EV investments will conserve cash and buy automakers time to lower their battery costs and other EV-related expenses. EV startups including Rivian, Lucid and Polestar are laying off workers, and Fisker has declared bankruptcy.
But cuts to planned EV output have hurt the parts supplier base, which has had to adjust its business. Magna, one of the world’s largest auto-parts suppliers, had been gearing up to make battery trays, seats and other parts for Ford’s now-scrapped electric SUV. Dana, another large supplier serving Ford and Stellantis, had expected sales of battery-cooling systems and other EV-related components to jump by 1/3 this year. “Like most things that are new or disruptive, a lot of times forecasts and expectations can get ahead of some of the practicalities,” said Dana’s CFO.
The cost of batteries is so high that most big automakers are in the red on their electric offerings. Ford’s EV business is on pace to lose $5 billion this year, with losses averaging $44,000 per electric vehicle sold!
Instead of offering the electric SUV, Ford plans to produce hybrid, gas-electric versions. It also delayed for a second time the opening of a new EV truck factory, the largest investment in its history, which is now set for a 2027 opening, two years later than initially planned.
New emissions rules from the Biden administration will in effect require a heavy dose of EVs in the late 2020’s. To comply, automakers will need to introduce more plug-in hybrid vehicles. Car companies are likely to focus on fully electric systems for small- and midsize vehicles, and hybrids for larger ones.
Classroom discussion questions:
- Why has the shift to EVs cooled?
- What is the impact on 1st and 2nd tier suppliers?