Ford Shifts EV Strategy Toward Smaller, Affordable Vehicles

Ford Motor Company is adjusting its electric vehicle (EV) strategy, focusing on smaller, more affordable vehicles as a pathway to profitability, marking a significant shift from its traditional emphasis on large trucks and SUVs. This new direction, described by Ford as an “insurance policy,” aims to capitalise on the growing popularity of hybrid models while expanding the automaker’s EV offerings.

Strategic Shift

Ford’s updated strategy includes cancelling the development of a large electric three-row SUV and delaying the production of its next-generation “T3” full-size electric pickup by 18 months until late 2027. Instead, the company plans to launch a commercial electric van in 2026, followed by a midsized pickup in 2027. The move reflects Ford’s belief that the highest adoption rates for EVs will occur in the affordable segment, particularly for smaller vehicles.

Marin Gjaja, Ford’s Chief Operating Officer for the Model e EV unit, emphasised the necessity of competing in the lower-cost segment. “We’re quite convinced that the highest adoption rates for electric vehicles will be in the affordable segment on the lower size-end of the range,” he told CNBC.

Cost and Production Adjustments

Ford’s revised EV plans will cost up to $1.9 billion, including a $400 million write-down of manufacturing assets and up to $1.5 billion in additional expenses. The company is also refocusing battery production and sourcing efforts in the U.S. to take advantage of tax incentives and credits, aiming to improve profitability amid a challenging market environment.

The decision to shift away from larger EVs, particularly the cancelled three-row SUV, was not made lightly. Ford CEO Jim Farley and other executives had previously promoted the vehicle as a key component of the company’s EV lineup. However, Farley acknowledged that the weight and cost of battery packs required for large vehicles are a significant limitation under current technology and charging infrastructure.

Broader Industry Context

Ford’s strategy contrasts with that of its main rival, General Motors (GM), which continues to focus on large all-electric vehicles, including several electric pickup trucks and SUVs. GM has committed to a vertically integrated EV platform and has begun U.S. battery cell manufacturing at scale, aiming to reach profitability on its EVs by the fourth quarter of this year.

Ford’s decision also aligns with broader industry trends, as automakers face slower-than-expected EV adoption and the threat of competition from Chinese manufacturers like BYD, which are rapidly expanding into global markets with more affordable EV offerings.

Long-Term Outlook

Despite short-term challenges, Ford’s shift towards smaller, more affordable EVs is seen as a strategic move to position the company for long-term success in the evolving automotive landscape. Investors have largely supported the changes, with Ford’s shares rising following the announcement.

“We’re focusing on what we think are the right technologies to serve our customers that can also be affordable for them and profitable for us,” Gjaja said.

This strategy reflects Ford’s adaptability in a rapidly changing market and underscores the importance of affordability and efficiency in the future of electric vehicles.