Ford's Electric Truck Production Cut

The latest report from Automotive News reveals that Ford will be reducing the production of its electric truck by half. The company has confirmed that this decision is in response to matching production with demand, although specific figures have not been disclosed.

While this slowdown news may not be ideal for the auto industry, it aligns with recent reports of a decline in electric vehicle (EV) demand in the United States. Both Ford and General Motors have adjusted their spending on EV assembly capacity for the same reason - to ensure a better balance between supply and demand.

Determining the exact level of electric truck demand in 2023 has been challenging. Ford has faced its fair share of hurdles, including a production halt of the Lightning model back in February due to a battery issue. The company later suspended production again during the summer to upgrade its assembly plant, impacting sales numbers.

However, sales started to pick up following the completion of the plant upgrade in August. In fact, Ford has delivered over 9,000 F-150 Lightning trucks in the months of September, October, and November combined, marking a significant 40% increase compared to the same period last year. Year to date, Ford's electric pickup truck sales have surged by 50%, totaling approximately 20,000 units.

As of now, Ford has sold around 36,000 units of the F-150 Lightning cumulatively. By the end of 2023, it is projected that the sales will reach approximately 40,000 units - slightly lower than the initial August estimate of 10,000 to 15,000 units higher.

Unfortunately, actual demand has fallen short of expectations. Instead of the anticipated monthly sales target of around 8,000 units, Ford is currently selling closer to 4,000 units per month. Consequently, Ford's revised production target for the F-150 Lightning now stands at approximately 6,000 units per month, a significant reduction from the original goal of 12,000 units.

Although the situation may not be ideal, Ford remains committed to adjusting its production to meet consumer demand and ensure a sustainable market for its electric trucks.

Electric Vehicle Demand and Sales Projections

The demand for electric vehicles (EVs) has not met initial expectations, but Ford is still projecting solid sales numbers. At a rate of 6,000 units per month, Ford estimates that they would sell approximately 70,000 to 75,000 EVs in 2024. This would represent a year-over-year growth of about 80% and account for around 10% of all F-Series sales.

However, the reasons behind the slower adoption of EVs have been extensively discussed by investors and Wall Street analysts. One concern is the lack of sufficient charging infrastructure, which makes potential buyers hesitant. Additionally, affordability remains an issue as EVs are still more expensive than traditional cars. The luxury market has also reached saturation, with battery-electric vehicles accounting for about 25% of all luxury car sales in the US during the third quarter. In contrast, non-luxury EV sales only made up approximately 3% of total sales.

When it comes to electric pickup trucks, including models from Rivian Automotive and GM, sales were relatively modest. During the third quarter, a total of about 23,000 electric pickup trucks were sold, comprising only about 1% of total US pickup truck sales.

Looking ahead, Wall Street analysts predict that Ford, GM, Rivian, and Tesla could collectively sell up to 200,000 electric pickups. If this projection comes true, it would represent approximately 6% of the overall pickup truck market. However, it remains to be seen whether this anticipated demand will materialize.

Full-size pickup trucks typically represent about 15% of total vehicle sales in the US. When smaller trucks are included in the calculation, this percentage rises to around 20%.

In the past year, Ford's stock has experienced an 18% decline, while the S&P 500 has gained about 16%. Factors such as higher interest rates, increased labor costs, and lower EV demand have negatively impacted investor sentiment.