One investment thesis for investors who are long on Ford Motor Company (F -1.92%) is that the company could quickly turn its $4.5 billion in annual electric vehicle (EV) losses into profits by 2026. That would be a big, and very valuable, amount of profits to be had. But one recent move by Ford calls into question whether the carmaker can indeed accomplish that goal by 2026.
Gone in a flash
F-150 Lightning sales rose 55% in 2023 to over 24,000 vehicles and it was America's best-selling EV pickup. It's one of the critical vehicles for Ford's EV ambitions, and arguably its most important when you consider the gasoline-powered F-Series trucks haul in a huge amount of Ford's profits.
Eventually, Ford needs that historic tow capacity to come from its F-150 Lightning EV truck. So the F-150 Lightning's importance to the Detroit automaker is what makes its recent move to cut capacity concerning to its goal of producing EVs profitably by 2026.
Image source: Ford Motor Company
As you can see, one of the biggest factors to reaching profitability is to improve scale. But that scale is going to be reached slower with production cuts to the F-150 Lightning. Last week, Ford announced it would cut two-thirds of the jobs at its Michigan plant building the F-150 Lightning, and it would drop down to one daily production shift from its previous two-shift and three-crew operation.
The flip side
While EV scale will be reached more slowly as Ford cuts its F-150 Lightning production in half, from 3,200 trucks a week to 1,600, part of those workers displaced will be asked to join a third crew to increase production of a much more profitable Bronco SUV and Ranger pickup.
"We are taking advantage of our manufacturing flexibility to offer customers choices while balancing our growth and profitability," CEO Jim Farley said in a statement.
Ultimately, if Ford is slower to reach its scale necessary to turn a profit on its EVs, it's more likely based on the fact the U.S. EV market is growing more slowly than hoped. Ford will reach the necessary EV scale quickly when the demand is there.
In the near term, this move should actually reduce Ford's EV losses temporarily as it focuses on producing more profitable vehicles. Remember that Ford loses quite a bit on each EV produced and sold.
Trouble in paradise?
At the end of the day, Ford's move is just about finding balance and reacting quickly to what management is seeing in the markets. Right now, EV sales are still growing and set a record volume in the fourth quarter, but are slowing down in terms of year-over-year gains. There's no trouble in paradise, just another day in the difficult-to-predict automotive industry. Ford will likely reach its Model e goals by the end of 2026. But the journey there is looking a little different in the near term.
