Ford to scale back electric vehicle plans, taking $19.5bn hit

Ford is abandoning plans to make large electric vehicles, the U.S. automaker said Monday, citing sluggish demand and recent regulatory changes under U.S. President Donald Trump.

The company will instead invest in producing cost-effective hybrid and gasoline vehicles and smaller, more affordable electric models.

Ford said it expects its profits to fall by $19.5 billion (£14.6 billion) as a result of the strategic shift, which comes as the Trump administration relaxes fuel economy rules.

The case for massive investment in electric vehicle production, particularly large electric models, has “eroded,” Ford said in a statement, “due to lower-than-expected demand, high costs and regulatory changes.”

“This is customer-driven change to create a stronger, more resilient and more profitable Ford,” Ford Chief Executive Jim Farley said in a statement.

“The operational reality has changed and we are redeploying our capital toward higher-return growth opportunities,” Mr. Farley added, pointing to the company’s trucks, vans, hybrid vehicles and energy storage businesses.

As part of Ford’s changes to its electric vehicle plans, the company announced that it will no longer produce a purely electric version of its popular F-150 pickup truck. The F-150 Lightening will instead be redesigned as a hybrid vehicle, with a gas-powered generator.

Ford also announced it would cancel its new electric minivan to focus on making gas and hybrid models.

The automaker’s decision to change its electric vehicle plans follows a similar announcement from General Motors in October. General Motors said it would need $1.6 billion to scale back its electric vehicle ambitions amid weakening demand.

Electric vehicle adoption in the United States lags behind the industry in countries like China, the United Kingdom and Europe. Analysts point to relatively weak government support for the sector.

The Trump administration has taken steps in recent months to reduce incentives and regulations that were supposed to lead to increased adoption of electric cars.

A government grant had already reduced the price of certain battery electric, plug-in hybrid or fuel cell vehicles by up to $7,500 (£5,608). But this tax credit ended in September.

Automakers expected momentum for electric vehicles to slow with the end of the tax credit. At the time, Mr. Farley said the electric vehicle industry would be “smaller, much smaller than we thought.”

And earlier this month, Trump announced plans to relax fuel economy rules, reversing another Biden-era policy that had raised hopes for an electric vehicle boom. The Biden administration’s standards were expected to avoid more than 700 million tons of carbon dioxide emissions by 2050.

Farley celebrated the easing of rules alongside other auto industry leaders. He called the change a “victory for common sense,” while environmental groups criticized it as a step backwards for the industry and public health.

The new fuel economy standards, he added, are “aligned with customer demand.”

The US changes come as the European Union is expected to water down plans to effectively ban new combustion engine cars from 2035.

Germany lobbied on behalf of its carmakers for the plan to be changed, arguing they faced stiff competition from Chinese rivals.

The European Commission is expected to make an announcement on the project on Tuesday.