In a stunning admission that underscores the turbulent landscape of the automotive industry's shift to electrification, Ford CEO Jim Farley recently declared a major strategic pivot. "Instead of plowing billions into the future knowing these large EVs will never make money, we are pivoting," Farley stated during an announcement of a sweeping overhaul in Ford's electric vehicle (EV) business. This bold move comes amid a $19.5 billion writedown, signaling the end of ambitious projects like the all-electric F-150 Lightning and other oversized battery-powered behemoths.
At the heart of this decision is a harsh economic truth: large EVs will never make money. Farley's words highlight a fundamental mismatch between the high costs of producing these vehicles and consumer willingness to pay. Large electric trucks and SUVs require massive battery packs to achieve viable range and towing capacity, driving up manufacturing expenses significantly. Battery materials alone, such as lithium and cobalt, remain volatile in price, often exceeding $20,000 per vehicle for high-capacity units. Add in the complexities of heavy-duty electric powertrains, specialized cooling systems, and reinforced chassis, and the cost equation becomes untenable.
Market dynamics exacerbate the issue. Consumers have shown reluctance to pay the premium prices these vehicles command—often $80,000 or more—when gas-powered alternatives offer similar utility at a fraction of the cost. "Customers have shown that they will not pay any premium for these large EVs," Farley emphasized. Adoption rates for big EVs have lagged, with factors like inadequate charging infrastructure for heavy loads and longer recharge times deterring buyers. Competition from Tesla's Cybertruck and Rivian's offerings has fragmented the market, but overall demand hasn't scaled to offset the investments. Ford's F-150 Lightning, once hailed as a game-changer, sold modestly compared to its internal combustion counterpart, underscoring that size doesn't equate to profitability in the EV space.
Broader industry trends support Farley's assessment. Legacy automakers like Ford poured billions into EVs under pressure from regulations and the green energy push, but profitability has eluded them. Electric vehicles as a whole struggle with margins—Tesla, the EV leader, only recently turned consistent profits through scale and software—but large models amplify the challenges. High upfront R&D costs, supply chain disruptions, and fluctuating raw material prices create a perfect storm where break-even points stretch indefinitely into the future.
Ford's pivot redirects capital toward "higher-return growth opportunities," likely including smaller, more affordable EVs, hybrids, and software-driven services. This includes scrapping plans for large three-row electric SUVs and focusing on compact models that could appeal to urban drivers seeking efficiency without the bulk. The move has real-world impacts, such as layoffs at Kentucky battery plants, affecting 1,600 workers. It's a pragmatic acknowledgment that the EV revolution isn't one-size-fits-all; smaller vehicles with lighter batteries can achieve better economies of scale and quicker paths to profitability.
This shift raises questions about the foresight of automakers in the EV race. With governments worldwide mandating emission reductions, companies like Ford raced to electrify their lineups, betting big on trucks and SUVs that dominate U.S. sales. Yet, the profitability pitfalls of large EVs—rooted in physics, economics, and consumer behavior—seem predictable. Battery tech hasn't advanced fast enough to make heavy EVs cost-competitive, and market saturation with affordable imports from China adds pressure.
Do you think they knew that even before they decided to do their EVs?
Talk about a big FRUNK YOU to all large evs!