Ford is currently the second biggest electric brand in the United States after Tesla, but it’s also the brand that has probably retreated the most from the industry’s rosy electrification plans. Now Ford is out with news that it’s killing its three-row electric SUV, delaying one of its EVs, and doing something totally different.
The theme of today’s Morning Dump is: If you want to make God laugh, tell him your plans.
New data about hybrid and EV owners is out, and it shows that charging infrastructure might be a bigger deal than we all think. Mazda is trying to move upmarket, and it’s sort of working, but at a huge cost to the automaker. Stellantis CEO Carlos Tavares is coming back from summer holiday to try and fix North America, the solution to and cause of most of his company’s problems.
Let’s dump.
The Ford Three-Row EV Is Dead, The EV Truck Is Delayed, But It’s Ok
Ford’s electrification plans were supposed to include a Tesla-fighting F-150 Lightning replacement due to be seen next year and put into production in 2026, as well as a three-row electric crossover/SUV-type thing due out soon after.
The truck is still coming, albeit later, but the three-row electric SUV is dead. Gone. Ford says it’s taking a $400 million dollar hit as it walks away from making that specific vehicle. What’s going to happen instead? Ford says its next big three-row vehicle will now be a hybrid, although it doesn’t clarify if it’ll be a PHEV or regular hybrid, or both. [Ed Note: Please be a range-extended EV. -DT].
This is extremely logical, both from an expenditure basis and a product basis. Right now the market for electric three-row vehicles from non-Tesla automakers is questionable at current prices. The Kia EV9 is supposedly the best thing since the Taco Bell French Toast Chalupa, though I’ve yet to drive it and confirm. How are sales? It just went on the market so they seem fine, but the $60-70k price for these vehicles is a lot and Kia seems to be tossing $7,500 on the hood to get them moving. And look how expensive the ID.Buzz is going to be.
Ford seems to have made the decision that it would be forced to either heavily discount its vehicles at a loss (as it does with most of its electric vehicles) or keep prices high and depress volume. As the man said: When life hands you lemons sometimes you just say screw the lemons and bail. Or, as Ford put it:
The electric vehicle market is rapidly evolving as 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.
In addition, today’s electric vehicle consumers are more cost-conscious than early adopters, looking to electric vehicles as a practical way to save money on fuel and maintenance, as well as time by charging at home. This, coupled with scores of new electric vehicle choices hitting the market over the next 12 months and rising compliance requirements, has amplified pricing pressures. These dynamics underscore the necessity of a globally competitive cost structure while being selective about customer and product segments to ensure profitable growth and capital efficiency.
“We’re committed to creating long-term value by building a competitive and profitable business,” said John Lawler, Ford vice chair and chief financial officer. “With pricing and margin compression, we’ve made the decision to adjust our product and technology roadmap and industrial footprint to meet our goal of reaching positive EBIT within the first 12 months of launch for all new models.”
And it’s not as if Ford has abandoned its electrification plants, it’s just adjusting them. Ford’s next big electric vehicle will now be an EV van due out in 2026 followed both by the delayed truck (T3) mentioned above and a smaller, more affordable truck from the company’s skunkworks team in California.
Again, this is all obviously sensible. The two biggest barriers to electrification are probably cost and infrastructure. Ford has tried to solve the infrastructure problem by partnering with Tesla on NACS charging standards. The cost thing is tougher and Ford clearly thinks it’s better off making money with hybrids in the interim, like Toyota is, while it waits for its input costs to come down sufficiently to be able to offer more affordable vehicles.
Charging Matters
Here’s a chart from S&P Global Mobility that shows what vehicle owners bought next after purchasing a gas, electric, or hybrid vehicle.
I love this chart because it breaks down BEVs (battery electric vehicles, i.e. electric cars), hybrids, and non-Tesla BEVs.
That most gas-owning customers went back to gas-powered cars isn’t a surprise, though it’s nice to see that hybrids are taking a bigger chunk of the pie and some people are considering BEVs. Hybrid owners tend to be more open to an EV and are otherwise split between getting another hybrid or a gas-powered car next.
BEV owners are way more likely to get another BEV, which is great news until you pull Tesla out of it and see about half either get a gas-powered vehicle or a hybrid. What gives? From S&P:
Hybrids can be viewed as the mid-point between a gas and electric powertrain, yet only 15% of hybrid owners choose a BEV for their next purchase. Instead, they are split evenly on remaining with another hybrid (41%) or moving back to a gas powertrain (41%). The lack of movement to BEVs could persist due to continued struggles in building a prevalent charging infrastructure along with a slowdown in EV demand.
This seems right to me. Tesla, as S&P points out, has super high brand loyalty so it’s not a surprise that electric car owners either go back to Tesla or get convinced to buy one by a friend. The company’s CEO aside, Tesla has a lot going for it. Specifically, Tesla has the best charging network and a Tesla owner is probably a lot less concerned about charging infrastructure.
Mazda’s Very Expensive Gamble
Mazda is trying to move upmarket. Why? Mazda has long been the slightly nicer economy car, even if the difference was mostly in better design. The cars look good and, by and large, drive to match the appearance. A move slightly upmarket means, ideally, more profits.
When I drove the new CX-70 the implication was that this is an upscale brand that can compete with Lexus. It’s working, maybe, as the brand has seen strong sales in 2024. But at what cost?
As Hans Griemel points out, the cost to Mazda is huge:
Deliveries improved 13 percent to 242,352 for the first seven months, oupacing the industry and putting it on track to reach record volume of 450,000 vehicles in 2024.
But spiralling incentives to move all that metal almost wiped out Mazda’s operating profit in the quarter. U.S. incentives per vehicle nearly doubled in the April-June period from the previous year and have jumped almost fourfold since the July-September quarter of 2022, Mazda said.
In the April-June period, Mazda spent ¥35.1 billion ($218.3 million) on incentives, easily erasing a modest ¥3.3 billion ($20.5 million) addition to operating profit from volume and mix.
With the yen remaining mostly down relative to the dollar, other than a little blip, it’s something that Mazda can afford to do for now. The company will get its big year, but what follows? I’m not sure, but the new Mazda CX-50 Hybrid is going to get a RAV4 drivetrain and that might help.
Carlos Tavares Reportedly Cut His Vacation Short Because North America Is Such A Mess
Stellantis CEO Carlos Tavares, pictured above, was apparently doing what most Europeans do in August: not work. Unfortunately, the company’s North American operations (i.e. the parts of the company that actually make money) are a mess.
What’s a CEO to do? From Reuters:
CEO Carlos Tavares has started a three-day visit in Detroit, where he will seek to develop a strategy to fix the European automaker’s struggling North American operations and reassure employees and investors, two people familiar with the plans said.
The strategy is likely to be developed by the end of this week, said one of the sources, who asked not to be identified.
While Tavares typically visits the North American operations every four to six weeks, the CEO’s visit this week during his summer break is meant to send a clear signal, the two sources said.
“He wanted to make clear he was handling it personally,” one of the sources said. “North American operations are basically funding the rest of the group.”
Good luck, Carlos, maybe stop by New York and say “hello” if you get a chance.
What I’m Listening To While Writing TMD
I’m still somehow in California, a state that’s untouchable like Eliot Ness, so let’s enjoy “California Love” from 2Pac ft Dr. Dre.
The Big Question
Is Ford doing it right or doing it wrong?
I want a BEV, but I’m not going to pay massive amounts of money for limited range and even more limited resale value. We need that BEV Maverick to come in at around $30K, even if it’s limited to 2WD. We need cheap BEVs to drive infrastructure improvements. Regular ‘muricans should be able to buy in when we want to, but a house payment for 8 years is simply not in the cards.
Ford needs a plug in maverick yesterday.
If North American operations are funding the rest of the group, then why is Stellantis killing off all of the stuff that was actually making money? Are there safety regulations changes that make it impossible to keep selling the LX platform cars? Obviously they have the Hurricane, but are CAFE or other emissions requirements tightening to the point that they can’t keep selling Hemi’s?
It goes beyond killing the Hemi and LX. CEO Tavares is the problem. He came into the merger when the magic was already happening, record profits per vehicle, and just got a huge raise making him the top paid CEO, despite his success being based on the work done before the Stellantis merger. He’s trying to recapture that magic of the last couple years, but he sucks bad at it. He’s pissing off his own USA management, the UAW, suppliers, dealers, and customers in the process. He’s behind on the push into EVs, but going ahead full steam, throwing a ton of money into it, while Ford and GM have looked at the market and realized they need to scale back on EVs. If someone hypothetically were to take charge at Stellantis with the intent of destroying the company as fast as possible, Tavares’ work would be a great blueprint to follow.
Kind of? Their fleet average emissions and economy are probably the worst in the industry. Stellantis has paid over $200M in penalties and carbon credits so far this year and are on track to pay over $500M by the end of the year.
Now, why they decided to kill the cars that people wanted rather than introduce EVs into the lineups to improve their averages, I don’t know. GM can sell me both the Silverado EV and an Escalade V. Ford likewise with a Mach-E GT or a Raptor R
Matt, do you know what the question to the next car was? Ie, “what is your next purchase”, or “what are you replacing your current vehicle with”? They could get quite different results, particularly in the US where I’d be thinking 2+ car house holds are the norm?
As an example, in our case, we’d likely ditch both petrol cars, get one hybrid, and one small electric. But the M3 will only be replaced by another petrol manual. So it would depend where we are in the timeline as to what the next purchase is. An alternative is a mate, who have been holding out on one car while they buy a property, but will very shortly buy an additional car.
Not having a dig, just good to have the context.
Sounds like Farley is saying it’s all about the Benjamin’s, baby…
I feel like a three-row thing is an untapped market. But hey at least Kia is doing it.