The Value of Hybrid Technicolor: Implications for the Future of EVs and How to Avoid the Cost of a Big New Car

EV buyers are early auto technology adopters who have already purchased, and automakers such as Ford have difficulties persuading mainstream buyers to go all electric because of the limited range and lack of charging stations.

“When you look at the three-row SUV, hybrid technologies or multiple propulsion technologies, for those customers, is the best solution.,” John Lawler, Ford vice chair and chief financial officer, said on Wednesday in a conference call with journalists.

Lawler said that the SUV segment was seeing a lot of competition. Most of the EV’s that are being developed for North America are two-row and three-row SUVs.

These SUVs will be built as hybrids instead, leading to the company taking a non-cash charge of about $400 million for the sunk costs. The cancellation could add an additional $1.5 billion to the hit.

“With EVs, it’s all about the battery,” Stephanie Valdez Streaty, director of industry insights at Cox Automotive, told NPR. She stated that batteries can account for up to 45% of a vehicle’s cost.

When you can take the battery size out of a larger vehicle, like a three-row SUV, you can have a better profit profile. “Because … the cost of the battery is so outsized for vehicles like this.”

Streaty says the equation will change a bit as battery technology advances. But she also says consumers may simply need to evaluate how much range they really need — and get used to the idea that a bigger battery means a bigger price tag.

She said that plug-in hybrid vehicles are a good option for consumers who want to go electric and still use gas on a long trip.

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The changes announced by Ford are not the only ones that have been adjusted. Streaty said that other companies have also adjusted their plans.

Carmakers like Ford, she said, must track a moving target as they try to match consumer demand. That ranges from manufacturing and charging infrastructure to consumers adapting to a different car ownership experience, Streaty said.

Noting that the Dearborn, Michigan, company is responding to market demand, chief financial officer John Lawler told reporters on a call today that Ford would be “pivoting” away from its existing electric future and instead expand its other platforms.

“What we’ve learned is that customers want choice, and so we’re providing that choice, with a full lineup of EVs, hybrid, electric, gas and diesel products,” said Lawler.

The creation of a 300-person EV skunkworks team in 2022—charged with developing a low-cost EV to take on China—was Ford’s attempt to be “nimble,” Lawler told reporters. Ford officials revealed today that the first vehicle from the Irvine, California, skunkworks team will be a midsize pickup due out in 2027.

He pointed to the fact that they knew they needed to change course, despite industry analysts’ warnings about China’s EV prowess for the past decade or more.

“The market is changing globally, with the Chinese at overcapacity, and so it’s all going to come down to being nimble, having a low cost and multiple low-cost platforms, and being able to adjust as we continue to develop the transition of this industry,” said Lawler.