Ford Postpones $12 Billion in EV Factory Building, Citing Customer Resistance to Higher Prices
Ford has announced that it will be delaying $12 billion in electric vehicle (EV) factory construction, including the planned battery factory in Kentucky. The decision comes as a result of customer unwillingness to pay extra for electric vehicles, which are currently priced at a premium. As a result, Ford’s transformation into an EV company will take longer than anticipated.
The automaker’s EV business has been experiencing significant losses, with adjusted earnings for the past quarter amounting to approximately $1.3 billion. Ford has already lost $3.1 billion on EV spending this year, and it expects to incur a total loss of $4 billion for the year.
The proposed “mega campus” in Kentucky, which was intended to manufacture lithium-ion batteries for electric cars, will be put on hold. However, the Blue Oval City project in Tennessee is still progressing forward.
Ford is not the only company facing challenges in the EV space. General Motors has also delayed production of its new lineup of electric trucks and SUVs. Tesla’s CEO, Elon Musk, has been vocal about the impact of interest rates on the industry during recent earnings calls. The current landscape is proving to be difficult for companies in the sector.
Customers are expressing their concerns as well, with early adopters already having purchased EVs and the next wave of potential customers being deterred by the high prices. In an attempt to address this issue, Ford has introduced new releases such as the F-150 Lightning Flash, which offers a mid-priced option for their electric truck. The company acknowledges that the demand from customers will determine the production of EVs, and currently, that means scaling back on large projects.
Despite the setbacks, Ford has achieved a breakthrough in labor negotiations. The company reached a tentative agreement with the United Auto Workers. Ford is the first of the “Big Three” US automakers to secure a deal. However, the recent strike has incurred costs of approximately $1.3 billion, and the company has withdrawn its guidance for 2023, indicating a lack of confidence in meeting earlier targets.
While Ford faces challenges in the EV market, it is clear that pricing remains a significant barrier to wider adoption. The company’s decision to postpone factory construction reflects the need to carefully evaluate market demand and adjust its plans accordingly.