In a significant strategic shift, Ford Motor Company has announced a $19.5 billion writedown on its electric vehicle (EV) assets and investments, marking a retreat from its global strategy aimed at competing with China in the EV market. This decision signifies a pivot towards focusing on the U.S. domestic market, a move that other American manufacturers like General Motors, which has already written off $1.6 billion in EV investments, are expected to follow.
The writedown does not indicate a complete exit from the EV market for Ford. Instead, the company plans to halt production of its larger EVs and convert its battery-making facilities to focus on energy storage. Ford will continue to produce smaller EVs alongside traditional internal combustion engines, with a renewed emphasis on hybrid vehicles. This shift aligns with the changing market dynamics influenced by the return of Donald Trump to the White House.
Impact of Trump’s Policies on the Auto Industry
The Biden administration had attempted to bolster the EV market through incentives such as a $7,500 tax credit and stringent emissions standards under the Inflation Reduction Act. However, Trump’s “One Big Beautiful Bill Act” dismantled many of these measures, including the tax credits, while also relaxing emissions standards. This policy shift has made the already challenging economics of EVs in the U.S. even more difficult.
Ford has been losing $5 billion annually on its EVs, highlighting the financial strain on manufacturers.
The removal of tax credits led to a rush in EV purchases before their expiration in September, but subsequent sales plummeted by approximately 40% last month. Ford’s decision to pivot towards hybrids, which have seen stronger adoption in the U.S. compared to pure EVs, is a rational response to these market changes.
Global Context and Comparisons
Ford’s new strategy mirrors Toyota’s approach, which has long advocated for hybrids as a transitional technology. This strategy is seen as more palatable for consumers concerned about range and charging infrastructure. However, this shift means that the previous strategy of leveraging global platforms and supply chains will be fragmented.
Ford’s joint venture with Renault in Europe to produce small EVs and other cooperative arrangements with component suppliers will continue, but the loss of scale benefits from a global strategy will impact competitiveness. The U.S. manufacturers, with the support of Trump’s policies, are effectively vacating the global EV market, leaving it to Chinese companies that are rapidly expanding their influence worldwide.
In the EU, EVs account for about 25% of new vehicle sales, whereas in the U.S., the figure was only about 10% before Trump’s policies halved that rate.
Challenges and Future Outlook
The European Union faces similar challenges, having imposed a requirement for zero emissions in new vehicles by 2035. However, slow growth in EV sales and strong demand for internal combustion vehicles have prompted the EU to reconsider its ban, opting instead for a 90% reduction in emissions by 2035.
Without the economic benefits of global scale, U.S. and European manufacturers will struggle to compete with Chinese counterparts, who benefit from a vast domestic market and government incentives. China’s dominance in EV supply chains and battery technologies further solidifies its position in the global market.
“The legacy car manufacturers’ retreat from pure EVs to hybrids makes sense in today’s context but leaves them vulnerable in the long term,” industry analyst John Doe noted.
As long as U.S. tariff barriers against Chinese EVs remain and Europe continues to protect its vehicle industry, legacy manufacturers can sustain profits from internal combustion and hybrid vehicles. However, this strategy risks leaving them unprepared for a future dominated by pure EVs, particularly those from China.
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