Ford Shifts Gears: Prioritizes Profitable F-Series Trucks Over Planned Electric SUVs

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In a strategic move, Ford Motor Company has announced a shift in its production plans at its Oakville Assembly facility in Canada. Originally earmarked for the development of three-row electric SUVs, the plant will now focus on building larger, gasoline-powered versions of Ford’s iconic F-Series pickup trucks, specifically the Super Duty line.

This decision comes amidst a broader trend within the automotive industry. The initial surge in electric vehicle (EV) demand has shown signs of slowing down globally. Leading manufacturers like Tesla (TSLA.O) and BYD (002594.SZ) have responded by lowering prices to stimulate sales, while established automakers like Ford and General Motors (GM.N) are re-evaluating their ambitious EV goals.

Demand for Super Duty Trucks Outpaces EV Growth

Ford’s decision reflects a calculated prioritization. The company continues to experience high demand for its Super Duty trucks, a vital tool for businesses and consumers alike. Existing production facilities in Kentucky and Ohio are already operating at full capacity, unable to meet the current demand.  “Super Duty is a vital tool for businesses and people around the world and, even with our Kentucky Truck Plant and Ohio Assembly Plant running flat out, we can’t meet the demand,” stated Ford CEO Jim Farley.

Profitability Concerns Hinder EV Rollout

On the other hand, the EV market presents a different scenario. Ford’s EV business continues to operate at a loss, with projections indicating a potential loss of up to $5.5 billion in 2024. This financial reality aligns with Ford’s February announcement – the company will only launch new generation EVs when they reach profitability. Similarly, GM has also backed away from previous announcements about its EV production capacity targets.

Legacy Automakers Leverage Existing Infrastructure

Legacy automakers still hold a significant advantage when it comes to their established gas-powered vehicle production lines. These factories are not only more settled but also generate higher profits compared to their fledgling EV operations, as pointed out by Sam Fiorani, vice president at research firm AutoForecast Solutions. As a result, Ford is strategically focusing on ramping up production of lucrative F-Series trucks, a move that is likely to generate immediate financial benefits.

Hybrid Vehicles as a Bridge to Full Electric

In the interim, Ford is also placing emphasis on hybrid vehicle production, aiming to quadruple output over the next few years. This strategy caters to a segment of consumers who are hesitant to fully commit to electric vehicles but are open to a more eco-friendly alternative.

Investment Aims to Bolster Production and Jobs

Ford plans to invest a substantial $3 billion to expand Super Duty production, with a significant portion allocated to the Oakville Assembly Complex. This expansion project is expected to secure existing jobs and create additional opportunities. The Canadian automotive union, Unifor, expressed relief at this news, acknowledging that Ford’s initial delay in new vehicle production was a cause for concern.

Commercial Business Remains a Profit Engine

While the EV sector faces growing pains, Ford’s commercial business continues to be a reliable source of profit. This segment, boasting operating profit margins of nearly 17% last quarter, serves as a financial anchor for the company as it navigates the complexities of EV development. Additionally, Ford is banking on software-related services within its commercial division to be a key driver of future profits.

A Calculated Move for Uncertain Times

Ford’s decision to prioritize production of its high-demand F-Series trucks over its originally planned electric SUVs reflects the current realities of the automotive industry. While the company remains committed to its EV goals, a focus on profitability necessitates a strategic shift. This move underscores the ongoing challenges and complexities faced by established automakers as they navigate the transition towards a more electrified future.