EV adoption is slowing as economic factors weigh on American households.
In a significant and unexpected move, Ford Motor Company has announced that production of the all-electric F150 Lightning, assembled at the Rouge Electric Vehicle Center in Michigan, will drop to single shift operations, impacting 1,400 employees starting April 1, 2024. Output will drop to 1,600 units per week. Light trucks and sport utility vehicles are the most sold, highest margin vehicles in America, and industry analysts attribute slow EV adoption in this segment to several factors. One is the moderate price of gasoline, which, at the national all grades average of $3.25 a gallon, is well off the five dollar a gallon peak of June 2022. Another important factor? The rise in interest rates.
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Episode Transcript:
In a significant and unexpected move, Ford Motor Company has announced that production of the all-electric F-150 Lightning, assembled at the Rouge Electric Vehicle Center in Michigan, will drop to single shift operations, impacting 1,400 employees starting April 1, 2024. Output will drop to 1,600 units per week. About 700 employees will transfer to a new third shift at the company’s Michigan Assembly Operation in Wayne, to meet high demand for Bronco and Ranger vehicles.
Ford recently announced structural changes to split the company into two primary business units, “Model E” focusing on electric vehicles and “Ford Blue” which will build internal combustion engine vehicles.
Plug-in vehicle profitability has been a struggle for mainstream auto manufacturers, and Ford is no exception. The factors are rising battery costs and supply constraints combined with warranty cost pressures. At the same time, the gasoline-powered Ford Bronco has proved to be a hit with SUV and off-road driving enthusiasts, while the Ranger pickup line was recently redesigned.
Their popularity is not surprising. Light trucks and sport utility vehicles are the most sold, highest margin vehicles in America, and industry analysts attribute slow EV adoption in this segment to several factors. One is the moderate price of gasoline, which, at the national all grades average of $3.25 a gallon, is well off the five dollar a gallon peak of June 2022.
Another important factor is the rise in interest rates. According to LendingTree, the percentage of auto loans that are 30 days delinquent is up 19% compared to the same period last year, and the average auto loan term for new vehicles is up to 68.3 months. The average American borrows just over $40,000 for a new car, and electric vehicles are significantly more expensive, with an F-150 Lightning carrying a base price of $57,000 and peaking at over $100,000 depending on trim and options.
The only other major competitors to the F-150 Lightning are Tesla’s Cybertruck, and Rivian, both of which also carry higher MSRP’s than ICE equivalents.
Pickups are a challenging market for EV makers. Many Americans use them for recreational uses that involve long trips and trailer towing. Commercial users typically haul at the payloads. Both are range-killers for electric vehicles, and the installed user base in both recreational and professional categories is too small to draw conclusions about performance, reliability and longevity.
Hunters and fishermen will have a fundamentally different take on consumer satisfaction compared to a tradesman, but commercial users will likely be the first to measure utility on a cost per mile basis. And in an election year, it’s far from certain that a Trump win will include a carryover of Biden administration purchase incentives for electric vehicles.
Ford may be hedging their bets, or they may simply be overwhelmed with orders for two popular, high-margin vehicles that need the production resources currently used for Lightning. Both factors may be in play, but in America, there’s no doubt about it: to carve out a real presence in the vehicle fleet, every automaker knows that pickup trucks are where the rubber meets the road.
