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Build for America or the World?

By Nora Eckert

DETROIT, Dec 16 (Reuters) – Ford CEO Jim Farley walked through Ford’s Michigan design studio on Monday afternoon, reflecting on how he and his team are about to shave thousands of work hours into an electric vehicle they hope will revolutionize the U.S. auto industry.

Shortly after, his company announced it would kill many of those battery-powered models and take a $19.5 billion writedown on EV-related assets. It’s the industry’s biggest electric vehicle retreat since US President Donald Trump’s sweeping auto-policy changes cooled EV demand.

Farley spent years telling employees and investors that catching up to Tesla and China’s major EV makers was an existential struggle. Now — after losing about $13 billion on EVs since 2023 — Farley says the way to survive is to scrap these unprofitable models.

“We can’t allocate money for things that don’t make money,” he told Reuters on Monday. “As much as I love those products, customers in the US wouldn’t pay for them. And that was the end of it.”

Farley’s outrage comes after Trump-administration policies stripped the industry of EV subsidies and eased restrictions on tailpipe pollution.

Most automakers can no longer sell EVs in the U.S. at a profit or in volume — but must sell in China, Europe and other markets to please regulators and compete with Chinese automakers expanding globally.

This has left Ford and other automakers with the challenge of tailoring very different vehicle lineups for different regions.

The approach layers in extra costs thought to be left behind by the industry in recent decades through globalization — essentially the same car, with shared supply chains, to sell globally. Fifteen years ago, then-CEO Alan Mulally called the strategy ‘One Ford’.

Now Farley needs more Fords. His company and others have turned to partnerships to absorb the additional costs of catering to various global markets. Renault and Ford announced a partnership earlier this month to build affordable EVs for Europe.

After announcing the partnership, Ford said Monday it would no longer build the electric commercial van it initially planned for that market. Ford is also looking for a Chinese partner to provide EV platform technologies, Reuters reported.

In EVs, Farley hopes to thread the needle by killing off most EV models but saving a $30,000 midsize electric truck due in 2027, engineered by a specialized Skunkworks team in California, against EV powerhouses Tesla and China’s BYD.

“As a global company competing with the Chinese and others, we don’t have time,” Farley said.

Michael Dunne, a consultant and former General Motors executive who spent years in China, said U.S. automakers have no choice but to balance U.S. profits from gas-powered trucks while competing with Chinese and other EV makers.

“EVs are not going away,” Dunne said. “So are we going to compete globally or are we going to stay home?”

Government aid drives electric cars

Sales of U.S. electric vehicles have been killed by the expiration of a $7,500-per-car consumer tax credit, a Trump-backed law, on Sept. 30.

That and other administration policies have cemented America’s position as an EV laggard compared to the world’s other two largest car markets. In China, EVs and plug-in hybrids account for nearly half of sales; In Europe, they comprise about 25%. U.S. sales have fallen by about 5% since Trump’s policies were implemented.

Ford’s write-up reflects a “broader industry calculation” that EV economics still won’t work without government support, said Stephanie Valdez Streeti, director of industry insights at Cox Automotive.

Other automakers are grappling with those brutal economics.

GM recorded a $1.6 billion charge in October as it scaled back EV plans and warned more charges would follow. It is retooling EV factories into gasoline-vehicle production centers. Analysts at Citigroup expect GM’s fees to eventually be lower than Ford’s. GM has overtaken Ford in EV sales, though analysts estimate the company continues to lose billions from them.

GM had dismissed gas-electric hybrids as a waste of capital while it leaned on a lineup of about a dozen EVs for U.S. customers, which had begun to gain sales traction before Trump’s policies took hold. Now some of GM’s biggest U.S. competitors, Ford and Toyota, are leaning heavily on hybrids and are seeing sales rise rapidly as consumers move away from fully electric vehicles.

After Ford ditches most EV models, it has pledged that by 2030 half of its global sales volume will consist of EVs, hybrid or so-called “extended range” electric models, which use a small gasoline engine to recharge a large battery. Those models today total 17%. If current consumer trends are anything to go by, the vast majority of those vehicles will be hybrids with no charging plug, which outsells plug-ins.

Hybrids account for nearly half of all U.S. sales for Toyota, which has been heavily criticized for sticking with hybrids over EVs in recent years. Elliott Johnson, chief investment officer at Evolve ETF, which holds Ford shares, praised the Detroit automaker’s move to follow Toyota’s lead.

“Hybrids are the future for legacy automakers,” Johnson said, providing an easy way for automakers to transition to electrified models without disrupting existing customers.

Stellantis has struggled to regain US market share by focusing on hybrids and prioritizing sales of fleet vehicles. Volkswagen built its standalone EV company Scout to address the electric market and leaned on partner Rivion and Chinese EV maker Xpeng to develop the software.

Representatives for Stellantis and Volkswagen declined to comment. A GM spokesman pointed to its previously disclosed plans to offer plug-in hybrids. A White House spokesman did not respond to a request for comment.

Asked what factors contributed most to the big move, from declining consumer interest in EVs to Trump’s policy changes, Farley said it’s hard to give any one particular weight. “It’s not one thing. It’s actually a combination of all of them.”

While the EV market has been tough for some time, Farley said the pressure to take action has increased recently.

“Over the last several months,” he said, “it’s become really clear to the team. We’ve got to make a change.”

(Reporting by Nora Eckert in Detroit, additional reporting by Abhirup Roy in San Francisco and David Shepardson in Washington; Editing by Mike Kollias, Brian Thevenot and Nick Ziminski)

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