(News Bulletin 247) – The company announced this Wednesday that the share of its investments dedicated to electricity would decrease significantly. A decision that can be explained by the group’s desire to improve its profitability.

The euphoria that had taken over the stock market for electric vehicles a few years ago has well and truly passed. Ford’s decision, which just delivered a plan this Tuesday to reduce its ambitions in this area, illustrates this a little more.

The American car manufacturer’s share price rose by 1.1% following these announcements, at around 5:20 p.m. on Wall Street.

In recent quarters, the American manufacturer had to deal with a certain skepticism from its shareholders regarding its electric shift, which resulted in significant losses. In 2023, Ford’s electric division called “Ford Model e” suffered an operating loss of $4.7 billion, compared to profits of more than $7 billion each for Ford Blue (thermal combustion vehicles) and Ford Pro (utilities). The company had also assured, last February, that it would strive to control costs as much as possible.

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Consumers more careful about costs

This Wednesday, Ford gave more assurances on this point. To summarize, the manufacturer will offer more choice to its consumers in terms of electrified engines, by using more hybrid than pure electric.

As a symbol of this decision, the company has decided to abandon the design of a large SUV with three rows of purely electric seats, switching to hybrid power. This will result in an accounting charge of $400 million linked to the value of certain assets that were to be used in the production of this all-electric vehicle.

Ford explains that it has realized that current buyers of electric vehicles are much more cost-conscious than the first adopters of this engine. This has driven prices down and requires both being more efficient on costs and more selective in terms of products, the company explains. And more pragmatic, therefore, in terms of engine.

“As America’s second-largest electric vehicle brand, we’ve learned a lot about what customers want and value, and what it takes to match the world’s best with cost-effective design, and we’ve developed a plan that gives our customers maximum choice and plays to our strengths,” CEO Jim Farley said in a statement.

Relocation of battery production

Because of these options for consumers on the engine, and the forecast of an increased demand for hybrid, the company warned that the share of its annual investments dedicated to pure electric vehicles would fall from 40% to 30%.

To reduce its costs, Ford will also adjust its battery supply. For example, with its Korean partner LG Energy, the company intends to transfer part of its battery production from Poland to Michigan, in order to benefit from the aid allowed by Joe Bien’s “Inflation Reduction Act”. This text of law grants tax credits, under certain conditions of local sourcing of battery components and materials, which must come partly from the “Mexico-United States-Canada” region.

Its joint venture Blueoval, with another South Korean group, SK, will also supply electric batteries from mid-2025, earlier than expected, the company assures.