Postpones investments in battery and EV manufacturing
FORD Motor Co. is adjusting its electric vehicle (EV) investment strategy as a shift in customer preferences in North America, has made consumers less eager to spend for EVs when compared to internal combustion or hybrid alternatives.
According to Ford CFO John Lawler, this means postponing around $12 billion in planned manufacturing capacity investments for EVs, including a second battery plant in Kentucky. However, Ford’s construction of Blue Oval City, its new EV manufacturing campus in Tennessee, will proceed as originally planned, as per a Ford press release received by Malaya Business Insight.
Lack of customer demand is also slowing production of the Mustang Mach-E, delaying the construction of a second BlueOval SK battery plant in Kentucky, and studying whether to move ahead with the $3.5 billion BlueOval Battery Park Michigan plant. These moves are seen as a sign that Ford is adjusting its EV plans in response to softening demand for EVs in North America.
This market attitude is an indication that customers are not paying a premium on EVs. There is between $4,000 to $6,000 price difference on a comparable EV versus an petrol powered or hybrid vehicle in the US.
There are a few reasons for this price difference. First, the batteries used in EVs are expensive to produce. Second, EVs are still a relatively new technology, and there is less economies of scale in their production. Third, EVs are often seen as a luxury good, and consumers are willing to pay a premium for them.
However, the price difference between EVs and ICE sedans is shrinking as the technology improves and becomes more widely adopted.
Many states and the federal government offer incentives to consumers who purchase EVs, which can help to offset the higher purchase price. This makes an upward trend for the overall EV market. However it’s not growing as quickly as Ford initially projected.
It’s important to note that Ford isn’t reducing its commitment to future EV models. Instead, the company will gradually increase its EV manufacturing capacity and corresponding investments.
In Lawler’s words, “The customer is going to decide what the volumes are.” Ford aims to align its production of gas, hybrid, and electric vehicles with the pace of EV adoption, offering flexibility that sets it apart from others in the industry.
As part of its Q3 earnings report, Ford’s electric-vehicle business unit, Ford Model e, reported an operating loss of $1.3 billion for the period, which is double the year-ago loss, despite a 26% increase in revenue. In the first three quarters of 2023, Model e incurred an operating loss of approximately $3.1 billion, aligning with Ford’s prior guidance of a full-year operating loss of $4.5 billion for this business unit. — Reporting from New Albany, Indiana.