Ford has written off $1.9bn as it cancelled plans for an all-electric large SUV in the US, opting to produce a hybrid version instead in the latest sign of western carmakers struggling to make profitable electric cars.
The US carmaker said on Wednesday that it would not be able to reach a profit on the electric SUV within a year, its measure of whether a new car is viable, citing the stiff competition from Chinese manufacturers. It will initially write off the cost of $400m (£300m) in tooling for the vehicle, plus another $1.5bn (£1.15bn) in extra costs in the future.
Ford also said it will delay the successor to its F-150 Lightning electric pick-up truck until 2027, after initially targeting a launch next year.
In stark contrast to Ford’s struggles, a new Chinese competitor, Xiaomi, said on Wednesday that it had beaten its delivery targets and would aim to sell 120,000 of its new electric cars by the end of 2024 – 20,000 more than initially planned.
Xiaomi is much better known as a maker of smartphones, but its push into the electric car market alongside the likes of BYD and Geely has become a symbol of the competitive threat posed by Chinese companies to incumbents in Europe and the US, including even US electric vehicle pioneer Tesla. The US and EU have responded by imposing steep tariffs on Chinese-made vehicles, arguing that Chinese carmakers have benefited from much bigger government subsidies.
Xiaomi said its electric vehicle unit was not yet profitable, but that it had made revenues of 6.2bn yuan (£670m) in the second quarter of 2024 after unveiling the SU7 saloon car in March.
Ford boss Jim Farley said the decision to produce fewer electric cars in favour of hybrids “gives our customers maximum choice and plays to our strengths”. Hybrid cars combine a polluting petrol engine with a smaller battery. Farley emphasised that hybrids “make a real difference in CO2 reduction”, although they still produce far more carbon in production and usage than pure electric vehicles.
Yet Ford acknowledged it was struggling with competition from China. It said that “Chinese competitors leverage advantaged cost structures including vertical integration, low-cost engineering, multi-energy advanced battery technology and digital experiences to expand their global market share.”
The carmaker also said consumers are generally “more cost-conscious than early adopters”, which has lead to a price war between companies. Higher interest rates have also pushed down demand.
The delay to the pickup truck will allow Ford to wait for cheaper battery technology to become available. Ford also said it would work with South Korean supplier LG Energy Solutions to shift production of batteries for its Mustang Mach-E SUV from Poland to Holland, Michigan, in 2025 to qualify for steep subsidies for US-built batteries and vehicles available under President Joe Biden’s Inflation Reduction Act.