Ford is willing to lose $2 billion to cut its electric vehicle business again

On Wednesday, August 21st, Eastern Time, due to continuous losses in Ford's electric vehicle business, Ford announced adjustments to their electric vehicle strategy, canceling the launch of a fully electric three-row SUV, a move that could cost Ford approximately $1.9 billion. In addition to canceling the delayed three-row electric SUV, Ford also decided to further postpone the release of a new generation electric pickup truck and reduce the proportion of funds allocated to electric vehicles from 40% to 30%. Furthermore, Ford announced on Wednesday that they will adjust their battery procurement plan to reduce costs. These actions signify a further retreat in Ford's CEO Jim Farley's electrification strategy. Four years ago, when he took over the company, he accelerated Ford's transition to electric vehicles. However, due to the slowing growth of the electric vehicle market, Ford incurred significant costs in increasing production, leading to an estimated $5.5 billion loss in the electric vehicle department this year. Cancellation of SUV Plan, Focus on Commercial Vehicles and New Pickup Trucks Ford originally planned to launch a fully electric three-row SUV but has now decided to cancel this plan. This adjustment is expected to result in a loss of approximately $1.9 billion for the company, including a non-cash asset impairment of around $400 million. These assets were originally prepared for the production of this electric SUV. Additionally, the company will incur additional costs of up to $1.5 billion in the coming quarters. Although the SUV plan has been shelved, Ford plans to introduce a brand-new fully electric commercial van in Ohio in 2026. Subsequently, in 2027, the company will launch two new pickup truck models. One is a midsize pickup truck, with its design platform led by a former engineering director who worked on Tesla's Model Y; the other is the next-generation electric pickup truck, planned for production in Tennessee, delayed by two years from the original plan. Facing a slowdown in demand for electric vehicles, Ford has decided to increase production of hybrid models, believing these models are more popular among consumers. At the same time, Ford plans to incorporate hybrid technology in its next three-row SUV to meet market demand. Furthermore, to reduce costs, Ford has also readjusted its battery procurement plan in the United States. The company plans to start producing a lower-cost lithium iron phosphate (LFP) battery in Michigan in 2026. This will be the first LFP battery plant in the United States, and Ford expects these batteries to provide consumers with up to $7,500 in tax credits. However, Ford had already cut the planned capacity of this factory by nearly half at the end of last year. Farley stated that the midsize pickup truck powered by these LFP batteries will bring significant changes in operating costs, making it cheaper and more economical than traditional fuel vehicles or hybrid vehicles. Despite the underperformance of the electric vehicle department, Farley is confident in the company's new strategy. He said, "We did a lot of homework before making this decision to ensure it is the right plan. I am very confident about this." Farley also emphasized that Ford's stance on the new electric vehicle models is very clear: "If these vehicles do not turn a profit in the first year, we will not approve production." Ford is expected to lose as much as $5.5 billion in its electric vehicle division this year. The company plans to update its electrification strategy in the first half of next year, which may provide a more specific profit timeline. Following Ford's announcement of these adjustments, the company's stock price rose by over 2.7% overnight on Wednesday, but the gains narrowed afterwards. As of Tuesday's close, Ford's stock price has fallen by 12% year-to-date.