US carmakers reduce ambitions for electric cars
After spending billions of dollars to join the electric car race, Ford and GM are scaling back or delaying investment plans to produce more gasoline cars.
To catch up with the electric car race, American automakers have spent billions of dollars over the past five years converting or building new factories, hoping that customers will flock to electric cars and soon abandon internal combustion engines.
However, over the past 12 months, the growth rate of electric vehicle sales has slowed significantly as some Americans worry about the price, the difficulty of charging, especially on long trips. Changing consumer psychology has forced manufacturers to adjust their plans and return to producing more gasoline and diesel vehicles.
In Ontario, Canada, Ford had planned to use its Oakville plant to produce electric SUVs by 2025. However, in April, Ford announced that the launch date would be delayed until 2027. On July 18, the company announced that it would use the plant to produce the F-Series Super Duty pickup truck with an internal combustion engine. Ford said that it would maintain the schedule for launching electric SUVs, but the location for their production is now unclear.
Ford CEO Jim Farley said the Super Duty is an important vehicle for businesses and people around the world. “Even at full capacity in Kentucky and Ohio, we still can’t meet demand,” he said. So the Oakville plant will add 100,000 Super Duty vehicles.
Vehicles are produced at Ford's Oakville plant in Ontario, Canada on May 26, 2023. Photo: Reuters
Ford’s move comes a day after GM said it plans to produce 200,000 to 250,000 electric vehicles this year, about 50,000 fewer than previously forecast. Earlier this week, GM also declined to reiterate its ambition to produce 1 million electric vehicles in North America by the end of 2025.
“We are being flexible. We have not announced a new capacity target and will set it based on demand,” a GM spokesperson said. Speaking to CNBC , GM CEO Mary T. Barra acknowledged that it will take longer to reach that capacity level, due to slowing electric vehicle sales.
Commenting to the New York Times , Arun Kumar, CEO of consulting firm AlixPartners, said the post-pandemic electric-vehicle hype had many manufacturers thinking growth would explode. "But it hasn't, and it's a smart move to make sure you don't lose market share in the internal combustion engine space," he said of the moves by Ford and GM.
Sam Fiorani, vice president of research firm AutoForecast Solutions, said traditional automakers continue to benefit from their legacy plants that produce gasoline vehicles, making them more profitable than electric models. For Ford, Super Dutys are still a big seller, so the company plans to invest about $3 billion to expand production of them, including $2.3 billion to build lines at its Oakville assembly complex.
Slowing global demand for electric vehicles has forced market leaders Tesla and BYD to slash prices to stimulate demand. Tesla has cut its sales forecast for 50% annual growth after global sales fell 6.6% in the first half of 2024. It has also delayed plans to build an assembly plant in Mexico and canceled an April meeting between CEO Elon Musk and Indian Prime Minister Narendra Modi to discuss factory investment.
S&P Global Mobility reported that 471,021 new pure electric vehicles were registered in the first five months of the year, up slightly from the same period in 2023. The market share of electric vehicles improved from 6.9% to 7.2%. Growth remained positive thanks to discounts and contracts with rental companies, according to research firm Motor Intelligence.
A year ago, the most common incentives were around $1,000 per car, but now some cars are offering more than $18,000 in incentives, such as the Kia EV9. Or last year, the Tesla Model Y and Cadillac Lyriq were subsidized $1,195 and $761, respectively, but now they are discounted $5,570 and $17,732.
Tom Libby, chief analyst at S&P Global Mobility, confirmed that EVs are making progress in terms of pure sales performance. But underneath those numbers lie massive incentives. “This is unsustainable and is hurting manufacturers,” he said.
In fact, Ford lost nearly $4.7 billion on its electric vehicle business in 2023 and is expected to lose as much as $5.5 billion this year. In February, the company said its next-generation electric vehicles would be launched “only when they can be profitable.”
Another reason for American automakers’ reluctance to embrace electric vehicles is that they are at a politically difficult time for the industry, according to the New York Times. US auto regulations could change dramatically if former President Donald Trump wins the November election. During his campaign, Trump pledged to undo many of President Biden’s policies, including policies that encourage the use of electric vehicles to address climate change.
Meanwhile, Ford is increasingly focusing on hybrid vehicles to appeal to those who aren’t ready for pure electrics, and aims to quadruple its hybrid production in the next few years.