Ford has written off $1.9 billion and abandoned plans for a large, all-electric SUV in the U.S. and will produce a hybrid version instead, the latest sign that Western automakers are struggling to build profitable electric cars.
The US carmaker said on Wednesday it would not be able to make a profit on the electric SUV within a year, which is its yardstick for whether a new car is profitable, citing strong competition from Chinese manufacturers. It will first write off the $400 million (£300 million) cost of tooling for the vehicle, plus another $1.5 billion (£1.15 billion) in additional costs in the future.
Ford also announced that the release of the successor to its F-150 Lightning electric pickup truck would be delayed until 2027, after originally planning a launch next year.
In stark contrast to Ford’s difficulties, a new Chinese competitor, Xiaomi, said on Wednesday it had exceeded its delivery targets and aimed to sell 120,000 of its electric cars by the end of 2024 – 20,000 more than originally planned.
Xiaomi is far better known as a smartphone maker, but its foray into the electric car market alongside BYD and Geely has become a symbol of the competitive threat Chinese companies pose to established companies in Europe and the US, including even US electric vehicle pioneer Tesla. The US and EU have responded by imposing high tariffs on vehicles made in China, arguing that Chinese automakers have benefited from much higher government subsidies.
Xiaomi said its electric vehicle division was not yet profitable but expected to generate revenue of 6.2 billion yuan (£670 million) in the second quarter of 2024 after unveiling the SU7 sedan in March.
Ford CEO Jim Farley said the decision to produce fewer electric cars and use hybrids instead “provides maximum choice for our customers and plays to our strengths.” Hybrid cars combine a polluting gasoline engine with a smaller battery. Farley stressed that hybrids “make a real difference in reducing CO2,” although they still produce much more carbon in production and use than pure electric vehicles.
Ford acknowledged that it is struggling with competition from China. The company said: “Chinese competitors are leveraging advantageous cost structures such as vertical integration, low-cost development, advanced multi-energy battery technology and digital experiences to expand their global market share.”
The automaker also said that consumers in general were “more cost-conscious than early adopters,” which had led to a price war between companies. Higher interest rates had also dampened demand.
The pickup truck delay allows Ford to wait for cheaper battery technology to become available. Ford also said it will work with South Korean supplier LG Energy Solutions to move production of batteries for its Mustang Mach-E SUV from Poland to Holland, Michigan, in 2025 to qualify for the large subsidies for U.S.-built batteries and vehicles available under President Joe Biden’s inflation reduction bill.
