Ford, GM push back spending on EVs

Slowing demand for electric vehicles has prompted General Motors and Ford Motor Co. to postpone billions of dollars in investments as the automakers decide they don't yet need additional production capacity.

The companies say they remain committed to an electric future and are not canceling future EVs or mid-decade profitability targets, even as they pull back on volume in the short term.

GM said this week it no longer will provide EV production targets but still expects to have the capacity in North America to build 1 million EVs a year by the end of 2025. Ford said it would push back about $12 billion in EV spending — including delaying one of two joint-venture battery plants it's planning in Kentucky.

GM and Honda also abandoned plans to co-develop a line of affordable EVs starting in 2027.

The automakers' moves reflect the "balancing act" between volume and profitability they must walk, particularly as the U.S. EV market is becoming more saturated without enough buyers, said Sam Fiorani, vice president of global vehicle forecasting at AutoForecast Solutions.

If GM and Ford were to add hundreds of thousands of units of capacity, he said, it would further crowd the market and require lower pricing to move inventory.

"The market itself is the bigger factor here, and the buyers are just not ready to transition in the volumes that everybody needs in order to make a profit," Fiorani said.

GM withdrew its commitment to build 400,000 EVs by mid-2024 as it works to balance production with demand, executives said this week, but is holding to its 2025 capacity target and a goal to make its EVs profitable by then.

The automaker is delaying three upcoming models — the Chevrolet Equinox EV, the Chevrolet Silverado EV's first retail-oriented trim and the GMC Sierra EV Denali — by a few months, CEO Mary Barra said on GM's earnings call. That followed a decision to push back production of electric Silverados and Sierras at a second plant — Orion Assembly north of Detroit — until late 2025.

GM said the Orion move would defer at least $1.5 billion in spending. It cited the need to "better manage capital investment while aligning with evolving EV demand" and improve profitability with updated engineering.

"It's clear that we're dealing with a lot of near-term uncertainty," Barra said, referencing both the UAW's lengthy strike and the EV transition.

"I hope it's equally clear that we're going to be acting with purpose, we're going to remain agile and we're making sure we have a system that has the ability to respond to where the market is," she said. "And our commitment is to deliver a strong and profitable ICE business, as well as a strong and profitable EV business, for our future."

Some Wall Street analysts said a reduction in EV volumes raises questions about GM's ability to achieve its profitability targets by 2025.

"With considerable uncertainty around EV demand, pricing, input costs and magnitude of labor cost increases, and spotty execution so far, we find it difficult to acquire comfort in the achievability of these targets," analysts at Deutsche Bank wrote this week.

Ford, in addition to delaying a battery plant, is reducing some Mustang Mach-E production. But the company said it's moving forward on its BlueOval City complex in Tennessee and the other Kentucky plant it's building with partner SK On.

"The narrative has taken over that EVs aren't growing; they're growing," CFO John Lawler told reporters. "It's just growing at a slower pace than the industry and, quite frankly, we expected."

Lawler said the company is not canceling second-generation EVs, including a three-row utility and full-size pickup, though he declined to say how long the company would delay its EV investments or the battery plant.

"As demand has softened, we'll need less capacity in the near term, so we'll push out that investment until the time when we need to put that capacity in place," he said.

Ford, on its second-quarter earnings call in July, delayed some EV production targets but vowed to continue pushing for 8 percent margins on EVs in three years.

"Mid- to late decade, those are reasonable targets, but that will be after a few billion dollars' worth of investment," Fiorani said of the margin goals for both automakers. "If you're building 100,000 Mustang Mach-Es and there's a natural market for 80,000 of them, that means you have to incentivize 20,000 more, and you just lose money," he said.

Lawler said Ford also was trying to find the right balance on EV prices.

"There's a tremendous downward pressure in the EV segment right now on pricing," he said. "What this is teaching us is that going forward, it's really a cost game. The market leaders in EVs have the lowest cost structure."

GM expects its Ultium Cells joint venture battery plant in Ohio to reach full capacity in November. Barra said it's on track to produce 36 million cells this year, with plans for 100 million in 2024.

A second battery plant, in Spring Hill, Tenn., will come online early next year, rather than this fall, as a result of construction delays, Barra said. Production on GM's Ultium platform doubled in the third quarter from the second quarter, she said.

GM will purchase lithium iron phosphate battery cells for its second-generation Chevrolet Bolt EV, the first use of that battery type in North American Ultium-based vehicles, Barra said. She did not disclose timing for the new Bolt; production of the existing model is scheduled to end this year.

Barra said the next-gen Bolt will mean "we are saving billions in capital and engineering expense, delivering a significantly cost-improved battery pack using purchased LFP cells, we're getting to market at least two years faster, and our unit costs will be substantially lower."

Michael Martinez contributed to this report.