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For months, Ford Motor CEO Jim Farley warned anyone who would listen that the electric vehicle transition was about to hit a wall, starting in September, when he predicted that the expiration of federal tax credits would cut the EV market in half. He said EVs would remain a \u201cvibrant industry\u201d but predicted they were \u201cgoing to be smaller, way smaller than we thought.\u201d<\/p>\n
The turning point was what Farley called a \u201cgame changer\u201d: the end of the $7,500 consumer incentive from the federal government, something that Farley saw cutting EV sales in the U.S. down to 5% of the industry from the current level of roughly 10% to 12%. (JD Power estimated that EVs represented 6.6% of new retail sales in January, suggesting the total picture is very close to what Farley predicted.)<\/p>\n
On Tuesday, during Ford\u2019s fourth-quarter earnings call, Farley presented the Detroit legacy manufacturer\u2019s confirmation of his predictions: a $4.8 billion operating loss for the Model E electric vehicle unit. CFO Sherry House confirmed that the bleeding won\u2019t stop there. The company expects the unit to lose another $4 billion to $4.5 billion in 2026, with the break-even target pushed back to 2029.<\/p>\n
\u201cThe customer has spoken. That\u2019s the punch line,\u201d Farley told investors, validating his own grim forecasts with a balance sheet that shows the high cost of a market correction he saw coming. In a sign that Farley prepared the market well for this moment, Ford stock is up more than 27% over the past six months.<\/p>\n
In response to what he calls the \u201cduty cycle\u201d of the consumer, a shorthand for how, where, and for what purpose a vehicle is used that Farley has been using for years, he declared an end on Tuesday to the era of building EVs solely to meet regulatory targets. \u201cWe aren\u2019t just building compliance vehicles at Ford,\u201d Farley said.<\/p>\n
Instead, the automaker is pivoting to a \u201chigh-volume, affordable end of the market,\u201d specifically targeting the $30,000 to $35,000 price range where Farley notes EVs \u201chave continued to thrive in America\u201d without subsidies. This strategy stands in sharp contrast to the industry\u2019s previous rush toward $75,000 electric trucks and SUVs\u2014products that Farley had previously noted customers found \u201cinteresting\u201d but too expensive.<\/p>\n
The pivot, however, comes with a hefty price tag. Ford expects to record approximately $7 billion in special charges over 2026 and 2027 related to scrapping its old EV strategy and disposing of assets that no longer fit the new road map. In December 2025, Farley announced a $19.5 billion writedown amid the company\u2019s pivot on EVs.<\/p>\n
JD Power found in January that \u201caffordability pressure remains significant\u201d in the car sales space, with the average monthly finance payment reaching $760, up $24 from a year ago. \u201cEV retail sales remain depressed as transaction prices jump through a combination of the elimination of federal credits and reduced incentives from manufacturers.\u201d<\/p>\n
While the EV division undergoes this painful restructuring, Ford is leaning on its traditional strengths to stay profitable. The company\u2019s commercial division, Ford Pro, delivered $6.8 billion in Ebit for the year, effectively subsidizing the electric losses.<\/p>\n
Farley also highlighted the growing consumer preference for \u201cpartial electrification,\u201d a trend he spotted early, noting that Americans were \u201cfalling in love with\u201d hybrids rather than pure EVs. On the call, he reported that Ford\u2019s off-road performance trims and hybrids now account for more than 20% of the U.S. sales mix, providing \u201cmassive earning power\u201d to fund the company\u2019s future.<\/p>\n
The earnings call also highlighted the volatility of the current political landscape, which Farley has previously navigated with calls for consistency. He acknowledged a \u201cpartnership with the administration\u201d and a \u201creset in the emission standards\u201d as key factors for 2026. However, trade barriers remain a wild card; the company took an unexpected $1 billion hit in the fourth quarter owing to an \u201cunexpected and late-year change in tariff credits for auto parts,\u201d further complicating the financial picture.<\/p>\n
For Farley, the 2025 results are a vindication of his caution. The initial EV gold rush is over, replaced by a smaller, tougher market that demands affordability over idealism. As he concluded on the call: \u201cThe customers in their duty cycle have spoken.\u201d<\/p>\n<\/div>\n
#Ford #CEO #Jim #Farley #knew #pain #bad #punch #line #billion #loss<\/p>\n","protected":false},"excerpt":{"rendered":"
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