Last month’s business news was certainly dominated by the biggest news story of December: Ford Motor Company is taking a $19.5 billion write-down in its investment in EV technology and vehicles. $19.5 billion. Let me explain. That is 19,500 million dollars. A staggering sum of money.
I have been predicting a major blowout in the EV industry, as I saw manufacturers rushing too far, too fast, into the domestic U.S. electric vehicle market, even getting out ahead of the consumer. In addition, charging infrastructure has been slow to roll out, adding to the sense of “charging anxiety” that many who have switched back to internal combustion engine vehicles have given as the reason for trading out of their EVs.
To be sure, go through any major city in Europe and see the rows of charging stations strategically placed throughout EU capitals and communities. But remember, they pay $10 or more per gallon for gas, so the switch to electric makes economic sense, while catering to the typical European’s greater awareness of clean energy. And of course, the elimination of the $7,500 tax credit that just took effect weeks ago has yet to be fully felt, and I predict we’ll see a flattening, if not a slowing, of EV sales for the foreseeable future.
Prediction. While I predicted this, I never thought in a million years that it would be the Ford Motor Company to take a colossal hit as it has. It will take $19.5 billion in charges tied to a sweeping overhaul of its electric vehicle business after struggling for years to make it profitable, with the majority of the charges coming in the fourth quarter.
As part of the strategic shift, the automaker is canceling a planned electric F-Series truck, shifting production toward gas and hybrid vehicles, and repurposing an EV battery plant. Ford will also convert its signature electric F-150 Lightning pickup into an extended-range hybrid vehicle.
The magnitude of asset impairments and write-downs is a testament both to the degree of difficulty Ford has had trying to profitably build and sell EVs and the extent to which the current administration’s policy changes will only exacerbate those challenges. The company has predicted that consumer demand for plug-ins will fall by half as a result of the current political winds.
Conversion. One of the most promising options is converting EV battery plants to produce cells for stationary storage, where demand is booming due to growth in AI data centers and needed upgrades to the power grid.
Utility-scale battery storage rose 50% during the first 10 months of this year to nearly 39.3 gigawatts from the end of 2024. Storage cells can eke out more usage from the existing grid because big new power plants can’t be built fast enough to serve data campuses that use as much power as cities.
But to make a profit on the capital-intensive, technically challenging business of cell-making, manufacturers have argued that manufacturing tax credits are critical to make the plants economically viable.
Ford is an industry leader in this transition. It is halting production at its Glendale, Ky., electric vehicle battery plant, which will undergo a $2 billion conversion to produce cells for energy storage to power the electric grid. The company’s Marshall, Mich., plant will now also build LFP cells for energy storage as well as a new line of small, lower-cost EVs coming in 2027.
Elsewhere, Ford is signaling a move to stick to its knitting. Plans call for converting a factory under construction in Stanton, Tenn., its first new assembly plant in half a century, to build gas-powered trucks rather than pure electric pickups. The Tennessee truck plant will build a new model that is not currently in the automaker’s lineup of small, medium, and large pickups.
We have all been waiting for EV vehicles to take a bigger share of our off-road and on-road fleet needs. It looks like we’ll be waiting longer.
AVP Index. After strengthening earlier in the year, the Index pulled back modestly this quarter, declining (-0.2%) month-over-month, though it remains firmly positive on both a year-over-year (+2.8%) and rolling 36-month (+14.1%) basis. This modest monthly retrenchment reflects a softening in several forward-looking indicators. While industry stock prices posted a strong monthly gain (+8.1%), suggesting continued investor confidence, residential and planning indicators weakened, tempering overall momentum and resulting in a slight near-term pause for the Index.