Not long ago, auto makers were touting electric cars as the future. Well, now they are slamming the brakes hard on that future as market reality has hit them like a 16-wheeler. See Ford Motor’s stunning announcement Monday that it will take a $19.5 billion charge on its electric-vehicle business.
“Instead of plowing billions into the future knowing these large EVs will never make money, we are pivoting,” Ford CEO Jim Farley said as he explained the company’s plan to boost its lineup of gas-powered cars and hybrids. Ford will also scrap its all-electric F-150 Lightning pickup, which has been a favorite of the EV-loving press.
Ford has lost $13 billion on its EV business since 2023, with bigger losses expected in years to come. Last year Ford lost about $50,000 for each EV sold. The truth is that the business case for EVs has always rested largely on government subsidies and mandates. Now that this combination of government favoritism and coercion is mostly going away, most car makers have much less reason to make EVs.
The Biden Administration sought to force-feed the EV transition with ramped up fuel-economy and greenhouse-gas emissions rules. Car makers were required to produce increasing numbers of EVs, which they had to sell at a loss because consumer demand was weak. The Inflation Reduction Act’s $7,500 EV tax credit boosted demand, but not enough to make the cars profitable.
This year’s GOP tax bill eliminated the tax credit in October, causing demand to fall off a cliff. Ford's EV sales fell by roughly 60% in November compared to the prior year. The tax bill also eliminated the penalty for noncompliance with the fuel economy mandates. Earlier this month the Trump Administration announced it will ease fuel-economy rules through 2031.
This deregulation has enabled Ford to cut its losses, sizable as they are. A $19.5 billion charge will hurt, but it’s better than spending tens of billions of more dollars on making cars that not enough Americans want to buy. Ford can focus its investments on gas-powered trucks and SUVs that are popular with customers and earn—dare we say the forbidden word—profits. If Ford makes more money, workers also make more in profit-sharing.
General Motors this fall also rolled back its EV plans and took a $1.6 billion charge. The American car industry would be stronger today had its CEOs not embarked on the EV joy ride with politicians promising subsidies.