Ford's shift away from EVs signals challenging 2026 for US market: analyst

The removal of key federal and state policies that have propped up the US electric vehicle market is setting up 2026 to be a tough year, an S&P Global Energy analyst said Dec. 16, with the challenging market environment exemplified by the $20 billion strategy shift just announced by Ford Motor Co.

The end of federal tax credits in September plays a role, said Fellipe Balieiro, director of global mobility research at S&P Global Energy, but the real long-term demand softener is the end of EV adoption targets in key states like California.

"If [Ford] is not going to be out of compliance for selling electric trucks, then why should they prioritize selling electric trucks?" Balieiro said. "If you're an automaker and you don't have to sell hybrids today, or in 26 or in 27 or potentially even 28, do you make the investment, or do you wait and see what happens?"

Generally speaking, purely electric vehicles are Ford's lowest-profit margin vehicles, he said. The company's EV segment was at a nearly $4 billion loss back in Q3.

"Anytime you reinvent yourself, if you're a legacy automaker, you're gonna lose money, because you've invested billions of dollars in research and machining and tooling, and until that equipment is fully amortized, you're going to lose money," Balieiro said. "You can't pass all of the costs on to consumers all at once or the vehicles become unaffordable."

Ford's restructuring

Ford announced its strategic shift away from electric vehicles and towards hybrid and internal combustion engine vehicles on Dec. 15.

"The company is shifting to higher-return opportunities, including leveraging its U.S. manufacturing footprint to add trucks and vans to its lineup and launch a new, high-growth battery energy storage business," Ford said in a statement. "As part of these actions, Ford no longer plans to produce select larger electric vehicles where the business case has eroded due to lower-than-expected demand, high costs and regulatory changes."

Ford will cancel planned electric vans and will focus instead on hybrid/gasoline options, it said. The company also announced that the next generation of its F-150 Lightning electric truck will be a hybrid.

Ford will focus on "smaller, affordable" models for its pure electric production, the company said.

Ford will record an about $19.5 billion charge from its strategy shift, mostly in the current quarter, with the remainder in 2026 and 2027. The company said these moves will put the EV segment on a "path to profitability" by 2029.

Ford's EV sales fell sharply after the federal $7,500 tax credit ended in September, but its hybrid sales continued to grow on the year, company data shows. Purely electric vehicle sales fell 60% on the year in November.

Ford is also facing supply chain disruptions due to recent fires at a key auto aluminum plant in Oswego, New York. The plant supplies 40% of the US auto sector's aluminum sheet. Ford previously said the September fire alone would cost $2 billion.

"The operating reality has changed," CEO Jim Farley said.

Battery storage business

Ford also announced a new battery energy storage system business alongside its announced shift away from EVs "to capture the large demand for battery energy storage from data centers and infrastructure to support the electric grid."

Ford will repurpose its battery manufacturing facility to serve this new business, leveraging "underutilized electric vehicle battery capacity," with a target of 20 GWh deployed annually by late 2027, it said.