Ford Navigates EV Market Collapse, Pivots to Hybrids Amid Persistent Losses

What happened

A Wall Street Journal article reports that Detroit automakers, including Ford, are facing a $50 billion hit as the EV bubble bursts due to regulatory changes and cooling demand, prompting capacity reductions. Ford's filings confirm this trend, with its Ford Model e segment incurring a $5.1 billion EBIT loss in 2024 and projected to lose $5.0–5.5 billion in 2025, driven by intense pricing pressure. In response, Ford is strategically reallocating resources, such as ending current-generation F-150 Lightning production and boosting gas/hybrid F-150 output, to anchor profits on traditional segments. However, the company remains vulnerable to external shocks, including tariff impacts that cost $700 million in Q3 2025 and warranty accruals that surged to $16.6 billion at 9M 2025. This shift underscores a broader industry retreat from pure EVs, but Ford's high leverage and embedded commitments keep execution risks elevated.

Implication

Ford's reliance on its profitable Ford Pro segment to fund the EV transition is now more critical, requiring close monitoring of 2026 guidance for evidence of Model e EBIT loss reduction and tariff impact mitigation. Failure to show year-over-year improvement in Model e losses by Q2 2026 would signal that the path to profitability is unattainable, escalating balance-sheet risks. The pivot to hybrids and trucks offers a near-term buffer, but investors must verify execution through production data and ensure capacity redeployment translates to volume stability. Persistent headwinds like tariffs or warranty costs could erode Ford Pro's earnings, undermining the core profit engine and limiting free cash flow. Until these uncertainties are resolved, the 'WAIT' rating remains justified, with attractive entry only if 2026 fundamentals confirm a sustainable turnaround.

Thesis delta

The news article corroborates the EV downturn already priced into Ford's stock, reinforcing the DeepValue thesis that near-term performance depends on managing losses and external shocks. It amplifies the urgency for Ford to deliver on its strategic pivot, but does not change the core investment call to await proof of improvement in 2026. Investors should still prioritize monitoring for Model e loss narrowing and cash flow recovery before considering new positions.