Automaker Ford has decided to pause its planned $12 billion investment in electric vehicles, including the construction of a battery plant in Kentucky, USA. The strategic move is based on the belief that consumers are currently unwilling to pay a premium for electric vehicles (EVs) over traditional gasoline or hybrid cars.
During the recent third quarter earnings call, CEO Jim Farley and CFO John Lawler acknowledged that while EV sales are growing, the market is not yet ready to bear the additional costs associated with EVs. Ford’s electric vehicle division continues to operate at a loss, with an adjusted loss of approximately $1.3 billion in the September quarter alone.
While Ford has undoubtedly faced financial setbacks due to its investments in electric vehicles, it is important to highlight the company’s commitment to this transition. John Lawler emphasized the importance of Ford’s second- and third-generation products, which will be designed to optimize costs by incorporating lessons learned from their initial market offerings.
In the electric vehicle industry, the key to success is not only producing a great product, but also achieving cost competitiveness. Ford recognized the influence of Tesla in setting the standard for cost control and scale in the electric vehicle market.
While Ford’s decision to pause its electric car investments may seem significant, the company reported net income of $1.2 billion for the third quarter, a significant improvement from the $827 million loss in the same period last year. It’s worth noting that General Motors is also facing delays in the production of new electric trucks and SUVs.
As consumer preferences and market demands continue to evolve, only time will tell how the electric vehicle industry will evolve and whether consumers will eventually embrace electric vehicles on a larger scale.
