Ford has announced its decision to reduce production of its all-electric F-150 Lightning pickup trucks and focus on increasing the production of popular legacy vehicles. This strategic move is aimed at securing better profits and narrowing down losses associated with electric vehicle (EV) production.
Reason Behind the Scale Back
The reduction in F-150 Lightning production is a response to slowing demand for EVs, prompting Ford to achieve an optimal balance of production, sales growth, and profitability. Starting April 1, the automaker will scale back production of its all-electric pickup truck and transition the Rouge Electric Vehicle Center in Dearborn, Michigan to operate on a single shift, impacting about 1,400 employees.
On the other hand, Ford plans to add 900 jobs and a third crew at its Michigan Assembly Plant in Wayne to ramp up the production of its popular Bronco SUVs and Ranger pickups, both of which are traditional internal combustion engine (ICE) vehicles. The company aims to capitalize on the strong demand for these legacy vehicles to improve its overall profitability.
Impact on Ford's Financials
The announcement of this strategic shift has contributed to a 1% boost in Ford’s stock, signaling a positive response from investors. This move follows reports from last month, which hinted at a significant cut in Lightning EV production for 2024. Although Ford has experienced a 9% decline in its shares in 2024, the company remains focused on leveraging its strengths in high-margin hybrids, which led to a substantial sales growth in the past year.
In 2023, Ford’s sales of ICE vehicles increased by 5.5%, reaching 1.79 million, while EV sales rose by 17.9% to approximately 72,600 units. Notably, the hybrid version of the F-150 outsold the Lightning EV, underscoring the demand for hybrid vehicles over all-electric options.
Long-term Considerations
While Ford has heavily invested in EV development and plans to achieve a production run rate of 600,000 vehicles per year by 2024, the decision to scale back EV production reflects the current market dynamics. Despite the long-term importance of
investing in its EV future, Ford is prioritizing areas that yield a positive return and maximize cash flow, such as its strong lineup of internal combustion engine and hybrid vehicles.
Industry Trends and Competitor Positioning
The slowdown in EV demand is not unique to Ford, as the auto industry grapples with challenges related to high repair costs, limited EV charging infrastructure, and fluctuating gasoline prices. Even industry leader
Tesla has faced pressure to lower prices on its models, creating additional competitive dynamics for legacy automakers like Ford.
However, Ford’s strong position in the hybrid vehicle segment, particularly with its F-150 and Maverick pickup hybrids, reflects the robust consumer demand for these offerings. The Maverick Hybrid saw a 67% increase in sales, surpassing the F-150 Hybrid, indicating a favorable market for Ford’s hybrid offerings. Additionally, the Maverick Hybrid accounted for over half of the total Maverick sales in 2023, further emphasizing the company’s success in the hybrid vehicle market.
Conclusion
Ford’s decision to scale back production of the F-150 Lightning EV in favor of focusing on its legacy ICE and hybrid vehicles underscores a strategic shift to enhance profitability and align with current market demands. By capitalizing on the strong consumer interest in hybrid vehicles and addressing the challenges in the EV market, Ford aims to navigate industry dynamics while optimizing its resources for sustainable growth and profitability.
