Is Ford Really Shifting Into Reverse With Electric Vehicles?

The global automotive industry is evolving rapidly. Countries such as China are accelerating with electric vehicle (EV) adoption, Artificial intelligence (AI) is being incorporated into multiple aspects of vehicle production, and automakers near and far are exploring the potential of autonomous vehicles. With all the technological progress being made around the world, investors might have stopped to ask themselves: "Why is Ford Motor Company (NYSE: F) going backward with EVs?"

Let's dig into Ford's recent near $20 billion move, and why it's not exactly taking a step backward.

Image source: Ford Motor Company.

Ford's EV pivot really stung for investors

The automotive industry was quick to hype the future of EVs. While the future is certainly likely to be filled with fleets of EVs, the market didn't gain traction nearly as quickly in the U.S. as anticipated. With an EV market not materializing as planned, Ford made the massive decision to pivot away from full-electric vehicles and instead pour more investment into its more profitable hybrids, extended range, and gasoline-powered vehicles.

The flip-flop in strategy will cost Ford about $19.5 billion in special charges, and among other things, will discontinue the F-150 Lightning EV, which was touted as a cornerstone of its EV ambitions, not even four years after the start of production. Ford wants to make it clear to investors, however, that despite the pivot, the automaker isn't moving backward on EVs.

The road ahead for Ford

"We're not going backward on EVs," Ford CEO Jim Farley said, according to Automotive News. "We're actually accelerating the amount of EVs we're bringing to market. We're just going to do less than we had planned. ... We learned so much being an early mover in EVs and a full-line manufacturer; we learned a lot about where we need to put our capital."

One place Ford must invest in is developing more affordable EVs, as many EV options are on the premium end of the market and aren't selling well. To combat this dilemma, Ford went back to the drawing board to redo its assembly line into an "assembly tree" that will simultaneously produce three parts of the vehicle before joining the sub-assemblies. Ford will also be introducing a Universal EV Platform designed to reduce costs, and it will drive the launch of a new $30,000 midsize Ford electric pickup in 2027. The kicker is that Ford believes it will be profitable very early in its life cycle.

What it all means for Ford investors

At stake is a significant chunk of Ford's bottom line. Investors should recall that Ford's Model-e division, responsible for its EVs, lost over $5 billion in 2024 alone, and with the U.S. EV market developing slowly, Ford had to act fast to begin reversing those losses. The good news for investors is that Ford is recognizing its misstep in jumping the gun on EVs and instead is focusing its capital on where the market is actually developing, rather than where the company hoped it would materialize. Investors can expect these massive moves to begin narrowing financial losses for Ford's Model-e business unit as soon as this year, and to make the business profitable by 2029.

Daniel Miller has positions in Ford Motor Company. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.