What Ford's surprise canceling of EV production in favor of 'profitable' ICE vehicles means for industry: 'Thought that growth was going to continue'

The demand for electric vehicles is not meeting the projected forecast from auto manufacturers, and Ford is one company cutting back on EV production in favor of internal combustion engine (ICE) vehicles, according to The New York Times.

What's happening?

While the company still plans to make EVs more broadly, Ford Motor Company announced plans to shift production at its Oakville, Ontario factory in Canada from electric sports vehicles to gas-powered pickup trucks. The news came shortly after General Motors announced it would trim down its forecast of EVs produced in 2024 by 50,000.

The appearance at this stage is that both legacy automakers are worrying about overproducing against demand.

"After the pandemic, there was a huge exuberance around EVs, and I think a lot of the manufacturers thought that growth was going to continue," Arun Kumar, a partner and managing director in the automotive and industrial practice at AlixPartners, told the Times. "But the reality is that's not the case, and it's a smart move to make sure you're not losing market share in internal combustion."

According to the Times, 269,000 EVs were sold in the first quarter of 2024. However, this was a 7.3% decrease from the last quarter of 2023, though Q4 is historically considered a popular period for sales across the board as dealerships pursue year-end targets.

Demand for EVs was growing at a slower rate than previously anticipated, much in part due to high interest rates, economic uncertainty, and consumer preference for hybrids, reports Reuters.

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The uncertainty around public charging stations across the country might have also contributed to less demand for EVs. While there are 188,600 charging ports in the U.S., reported Wired, this is still far from the 134 million that would be needed to replace gas-powered cars. Public charging stations have also been subject to vandalism and theft of copper wiring, rendering them useless.

Why is the slowing of production of electric vehicles concerning?

Demand for Ford's Super Duty Trucks, "one of its most profitable models," has gone up, forcing the company to shift away from electric vehicles to meet the demand for ICE trucks.

While the price of purchasing an electric vehicle can be more than traditional gas-powered cars, they can be cost-efficient in the long run, as drivers spend 60% less on fuel costs annually. There are also numerous tax credits that can help bring the price of EVs down.

However, the current demand and the shifting of Ford's factory to ICE pickups shows that we are far from an electric vehicle future. According to Edmunds, only 6.8% of vehicles sold in May 2024 were electric. This will make it harder for the U.S. to reach net-zero car pollution by 2050 and will lead to more air pollution.

What's being done about the slowing of electric vehicle demand?

The Biden-Harris administration remains committed to ramping up electric vehicle production. It recently pledged almost $2 billion to support electric vehicle auto manufacturers and workers.

Other companies and states are trying to find ways to promote buying electric vehicles to keep them cheaper and to avoid the issues associated with public charging stations. Minnesota recently opened a new rebate application for new EV drivers. Meanwhile, rental car company Hertz is offering used EVs for as little as $19,500.

Companies are also looking for ways to address problems with charging efficiency so the prospect of vandalism decreases. A startup in the UK designed a charger that can charge 80% of the battery in just five minutes. Ford itself even released a new home charging station for maximum efficiency.

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