A historic turn! Ford (F.US) from All-in to Retreat: Abandoning Pure Electric Vehicles at a Cost of $19.5 Billion, Strategy to Increase Hybrids and Energy Storage

The Zhitong Finance App learned that Ford Motor Company (F.US) announced on Monday that it will charge 19.5 billion US dollars to invest in electric vehicles. This is the most obvious sign that the automobile industry has abandoned electric vehicle technology so far, and automobile manufacturers wholeheartedly embraced this technology at the beginning of this century. Most of this amount was used to cover the costs associated with canceling all-electric models that took years to develop. Ford is shifting its focus to expand the market for traditional fuel and hybrid models to better meet the preferences of American car buyers.

Here are some notable aspects of Ford's announcement:

What are the details?

Approximately $8.5 billion is associated with the costs associated with canceling various future electric vehicle projects, including a large pickup truck originally planned to be manufactured in Tennessee. In addition, Ford also wrote down $6 billion due to the battery business in a joint venture with South Korea's SK-ON company — SK-ON announced the end of the partnership last week.

SK On, a subsidiary of SK Innovation, announced on Thursday that it has reached an agreement with Ford to terminate the joint venture between the two parties. The two companies will split their assets: Ford will own and operate two battery plants in Kentucky, while SK ON will operate the plant in the Blueoval SK campus in Tennessee.

Four years ago, Ford Motor Company and South Korean battery manufacturer SK On reached an agreement to establish a joint venture and invest $11.4 billion to build plants in Tennessee and Kentucky to produce batteries for the next generation of electric F-Series trucks.

Ford described another $5 billion as “additional expenses associated with the project.” Of all expenses, only about $5.5 billion will affect cash flow, and Ford said these expenses will be generated next year and 2027.

However, Ford said that due to continued strong business fundamentals and cost improvements, the company raised its 2025 adjusted EBIT forecast to $7 billion from the previous $6 billion to $6.5 billion.

Weak sales of electric vehicles prompted withdrawal of investment

Ford has actually abandoned all of its next-generation electric vehicle projects, including large pickups and some commercial vans. When Ford announced the details of the manufacturing plant in 2023, it had anticipated that the Tennessee plant would eventually produce 500,000 electric trucks, but now it will switch to fuel trucks.

Ford said it will replace planned electric commercial vans with “affordable” hybrid and gasoline commercial vans in North America, which will be assembled at Ford's assembly plant in Ohio. This means Ford's electric vehicle strategy is shifting its focus to a series of more affordable models developed by a so-called “secret R&D team” in California. The company said the first model in the series will be a mid-size pickup truck, which is expected to hit the market in 2027 and cost around $30,000.

Ford Motor Company announced that sales volume in the US for November was 164,925 vehicles, down 0.9% year on year. Sales of electric vehicles were 4,247 units, a sharp drop of 60.8%. Among them, by brand, Ford F-150 Lightning sold 1,006 units (-72%), Ford Mustang Mach-E sold 3,014 units (-49%), Ford SUVs sold 55,888 units (-3.7%), and Ford Bronco: 11,045 units (+7%).

This is the stark opposite of what happened in the first three quarters of this year, when Ford announced its best-ever electric vehicle sales rate. Ford sold a record 30,612 electric vehicles during this period, up 30% year over year.

The goal is to reduce losses

Since the introduction of the Ford F-150 Lightning, the electric vehicle industry has faced many challenges. Tesla launched a fierce price war to cope with the decline in sales, which further encroached on the already meager (or even loss) profits of traditional car manufacturers. Trump's re-election and the Republican Party's control of Congress led to the overthrow of many of the Biden era's subsidy policies aimed at encouraging electric vehicle sales.

Like almost all traditional car manufacturers, Ford continues to lose money in the electric vehicle business — losing $5 billion in 2024, and losses may increase by several billion dollars this year. Automotive industry executives said the main reason was the high cost of batteries, and battery costs are falling far less than expected.

In fact, the company is reducing losses by accruing huge expenses. Reducing investment in the loss-making electric vehicle sector should help its profits over the next few quarters.

Ford said all of these moves will help increase its profit margins. Ford's electric vehicle division, Model e, predicts that next year's revenue will begin to improve and become profitable in 2029. Ford's Model e division has lost billions of dollars over the past few years.

New strategy focuses on hybrid models: Lightning models will be converted to extended-range electric vehicles (EREVs)

Despite the difficult development of electric vehicles, hybrid cars are still one of the company's highlights. Hybrid vehicle sales increased 14% in November, and Ford's sales have reached 205,497 units so far this year, an increase of more than 19%.

Ford said hybrid vehicles (combining gasoline engines and batteries to improve power and fuel efficiency) will drive growth over the next few years. The company expects its share of global sales of hybrid vehicles, extended-range electric vehicles, and pure electric vehicles to reach 50% by 2030 from today's 17%.

For example, the Ford F-150 Lightning is an all-electric pickup truck launched in 2022, and Ford said it will eventually transform it into an extended-range electric pickup. The model will be equipped with a gasoline generator that will charge the battery while driving, allowing the driver to travel 700 miles without recharging or refueling midway.

New strategy focuses on investing in battery energy storage to catch up with the boom

Ford will manufacture batteries for energy storage services at its plants in Kentucky and Michigan, which are in high demand in data centers due to the boom in artificial intelligence. The company said it was a new business covering sales and service, and said it would invest $2 billion to launch the business over the next two years.

Ford has conducted in-depth research on the industry and can use its manufacturing expertise and approved advanced battery technology to begin producing energy storage units within 18 months, thus enabling the company to seize the growing market share of battery energy storage systems in the US. Ford currently plans to deploy at least 20 GWh of energy storage capacity each year by the end of 2027.