Ford Cancels Electric SUV Model
Okay, for the electric vehicle market, this is huge news. This was actually the front headline on The Wall Street Journal today about electric vehicles. Now, it may not seem like a big deal that a company is canceling an electric vehicle model, but it really is like a canary in a coal mine. You know, companies put their money where their mouth is, and companies have to invest large amounts of money in new models and take losses if they abandon them. Well, that’s what’s happening here. Ford had planned for an electric SUV, and they had started development, engineering, planning, and distribution—they’re canceling that model.
Financial Impact of Cancellation
The cancellation is going to cost them $1.9 billion in write-offs. What does that mean? That means they figure it’s cheaper to give away $1.9 billion today rather than what they would lose trying to sell that vehicle in the future. That’s a huge indicator of their knowledge of the market. They’re insiders. They’re one of the largest auto manufacturers. They know what the market is; they know what people are wanting to buy at dealerships. They know what their dealers are telling them. They know what the economics are of selling vehicles at certain price points and, more importantly, what the demand is for certain vehicles.
Low Demand for Electric Vehicles
They’ve had a lot of experience selling the Mustang Mach-E for the last couple of years. They know what the demand is, meaning it’s not that much, and if they come out with an SUV, they know what they’re going to lose trying to sell it. So they figure, two billion, let’s throw that away rather than chase this red herring. That is probably one of the most clear indications of what the smart money or the big money thinks is going to happen with electric vehicles.
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Electric Vehicles’ Role in the Market
Probably not in the pathway that has been envisioned up until now. People are not using these as their primary everyday vehicle. Most people are using them either as a second vehicle. There are some people that have them as a status symbol. Some people bought them as a cheap alternative, maybe, to paying for gas, but they’re finding that it doesn’t cost that much less. The electricity costs about the same, and it’s hard to keep them charged—it interrupts your life.
Government Influence and Market Realizations
The backlash is now being realized by dealers. Now, dealers also had the influence of the government saying, “We’re giving you incentives; you have to do this.” They put some mandates that you can’t sell gas vehicles after 2030 or 2035. Manufacturers now are realizing that’s probably not realistic, so they’re cutting back on their all-in commitment to electric vehicles.
Future of EV Production
I suspect that there will be more pieces of news like this in the future, with less commitment to purely electric vehicles. Certainly, every manufacturer will have some EVs—that’s not an issue. Some manufacturers will have plug-in EVs or plug-in hybrids. Some of them will have one or two models. Obviously, Tesla is all EVs. The market will determine how many electric vehicles are needed in the marketplace. The market will determine that based on how good they are for the price and how they can be used in life.
Market vs. Government Mandates
When something tries to come in and influence the market, like government mandates or excess exuberance about how the market is going to respond to it, this is what happens. It costs you two billion dollars, and other manufacturers are doing the same thing. I know you have an opinion about this—let us know in the comments what you think.
