On the automaker's fourth quarter results call, CEO Jim Farley was forthright about Ford's missteps in its EV strategy to date and said a crucial period was approaching for automakers undertaking the transition to EVs.
"We think this has been a seismic change in the last six months of last year. That will rapidly sort out winners and losers in our industry," Farley says.
To meet this challenge, Ford will pivot away from larger EVs in a partial departure from its long-touted strategy of going after customers and segments it knows well.
"We are going to spend less capital on larger EVs. And as we have always said, we will have a very small number of those," Farley says.
Whatever large EVs Ford does release will be focused on geographies and product segments where the firm has an existing advantage, such as trucks and vans.
Ford will also use leverage its "dominance" in Ford Pro software and services in its new commercial EV line-up.
Farley remains confident in the outlook for the EV division.
"Our overall EV business will grow this year because we have the Explorer launching in Europe and really exciting, many of our commercial vehicles launched with electric this year as we refresh the line-up," he says.
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Future competition
Farley was clear about where the company sees the EV market heading and the role that compact vehicles will play.
"The ultimate competition is going to be the affordable Tesla and the Chinese OEMs," he says. "That bet and all of the rightsizing of capital and even delays to some of our products, given the market realities, better balances growth, profits and returns for us."
Tesla's ability to make vehicles despite the chip crisis in 2021 and 2022 gave Ford too optimistic of a demand signal, driving oversupply, according to Farley.
But Ford's second generation of EVs will be profitable in the first year after launching, Farley predicts.
"That will mean that we will get to mid to high single-digit Ebit profit margins over their life cycle," the CEO says.
Ciaran has written about finance, politics and culture. He is passionate about e-mobility and what it means for our way of life.
Ciaran has a Masters in Ancient Philosophy from Oxford University.
