Ford Motor Company announced Wednesday that it is canceling plans to develop an all-electric three-row SUV amid slowing consumer demand, despite the billions of dollars in tax incentives and direct subsidies the automaker has received to scale up EV production.
The announcement—which the Michigan-based company characterized as a way in which it "broadens" its electrification strategy—is the latest sign of the EV industry faltering, even as federal and state officials seek to prop it up to meet ambitious climate goals and mandates. Ford said it will shift to developing its next three-row SUV as a hybrid instead of a battery-electric vehicle, a move that could cost the company nearly $2 billion.
Overall, the federal government and State of Michigan have collectively promised roughly $10 billion in taxpayer funds to support Ford's unprofitable EV plans. And the 2022 Inflation Reduction Act, the Biden-Harris administration's crowning climate achievement, set aside billions of dollars for domestic EV and EV battery manufacturing and tax credits designed to incentivize greater EV adoption.
"The money that's being dumped into this is forcing market changes that consumers don't want, and it is a bubble that I think is bursting right now as Ford continues to lose billions of dollars on their EVs," Jason Isaac, the CEO of the American Energy Institute, said in an interview. "It's a criminal abuse of tax dollars."
"We've really reached peak EV market," Isaac added. "Ford and other automobile manufacturers are recognizing this, and they're going to things that people want—hybrid electrics that get longer range, that have better fuel economy, but have that convenience of having fuel charging that works in a matter of minutes."
Ford's decision Wednesday comes just one year after the Department of Energy announced a commitment to earmark a record $9.2 billion for three Ford EV assembly and battery manufacturing plants located in Tennessee and Kentucky. The agency said the loan supports the Biden-Harris administration's "investing in America" agenda, goal for half of all new car sales to be electric by 2030, and environmental justice Justice40 initiative.
When Ford announced those three facilities in September 2021, it said they would produce batteries to power future electric Ford and Lincoln vehicles, likely including the now-canceled three-row all-electric SUV.
In a statement to the Washington Free Beacon, Department of Energy spokeswoman Samah Shaiq said the $9.2 billion loan is a conditional commitment and has yet to be disbursed. She added the loan is for the company BlueOvalSK, not Ford. BlueOvalSK was founded in 2021 by Ford and South Korean battery company SK Battery to manage the automakers' battery business.
Months before the Energy Department committed its loan for the three Ford plants, meanwhile, Michigan governor Gretchen Whitmer (D.) announced her administration would spend $1 billion to support a battery manufacturing facility that Ford is developing in Marshall, Mich., projected to power 400,000 future Ford EVs. That funding included $210 million in direct funding and $772 million in reduced property taxes for the project.
"Today's generational investment by an iconic American company will uplift local families, small businesses, and the entire community and help our state continue leading the future of mobility and electrification," Whitmer said at the time.
That Marshall project has received intense scrutiny over Ford's deal with Chinese battery maker CATL to develop batteries at the facility. CATL and its founder Zeng Yuqun have substantial ties to the Chinese Communist Party. Lawmakers who identified those ties have called on Ford to sever ties with the company.
Ford has downplayed CATL's involvement, stating that it retains full ownership of the Michigan facility and that CATL is being contracted for specific services under a licensing agreement.
Beyond direct loans or grants, Ford figures to cash in on the many subsidies earmarked for EV manufacturing in the Inflation Reduction Act. The legislation's section 48C advanced energy credit is worth up to $10 billion and provides certain projects a 30 percent tax credit. Ford wasn't listed as a recipient in the Department of Energy's first round of 48C funding, released earlier this year and worth $4 billion.
The Inflation Reduction Act's 45X production tax credit provides $35 per kilowatt-hour of battery cell manufacturing and another $10 per kilowatt-hour of battery module assembly. Lithium-ion batteries used for EVs cost an average of around $100 per kilowatt-hour.
Further, the 30D clean vehicle credit in the Inflation Reduction Act reduces the amount consumers pay for qualifying EVs by $7,500, a key incentive considering the high price of EVs. Factoring in that incentive, the average EV transaction price is $56,520, over $8,000 more than the average transaction price of gas-powered vehicles, according to the most recent Kelley Blue Book data.
"The important thing is that we're continuing to invest in American manufacturing," Ford spokeswoman Jess Enoch told the Free Beacon. "We expect to meet the commitments we made relative to incentives."
Enoch pointed to comments from Ford CEO Jim Farley highlighting how the company's domestic battery manufacturing projects are progressing and are still on track to come online next year.
Still, the EV sector broadly continues to face substantial financial hurdles, best evidenced by Ford's own struggles. The company reported last month that its EV business lost a whopping $1.1 billion during the second quarter while selling 23,957 total units, meaning it lost nearly $46,000 per EV sold. The company said it anticipates its EV business will lose up to $5.5 billion in 2024 thanks to "continued pricing pressure."
Between January and March, just 9.3 percent of light-duty vehicles sold in the United States were either plug-in hybrid or battery-electric, a decline from 10.2 percent in the final quarter of 2023, according to data released in July by the auto industry association Alliance for Automotive Innovation. Battery-electric sales dropped nearly 1 percentage point year-over-year, the data showed.
Forty-four percent of Americans, meanwhile, said they would consider purchasing an EV, down from 55 percent compared with last year, according to a March poll conducted by Gallup.
The Zero Emission Transportation Association, a leading industry group pushing the full-scale electrification of the transportation sector, declined to comment on Ford's announcement but said EV sales continue to grow, pointing to a Kelley Blue Book report that EVs represented 8 percent of all new car sales in the second quarter.