Ford is not giving up on EVs — and has Elon Musk’s ‘affordable Tesla’ in its sights

The Explorer is one of Ford’s electric offerings.

Lukas Schulze/Getty Images

Ford will spend more on mass-market EVs, its CEO said Tuesday.”The ultimate competition is going to be the affordable Tesla,” Jim Farley told analysts.Elon Musk’s company plans to launch its own cheaper EV, dubbed the “Model 2.”

Ford is planning to spend more on developing mass-market electric vehicles, CEO Jim Farley said Tuesday, in a move that could result in a rival to Tesla‘s long-awaited “Model 2”.

After the carmaker posted its earnings report for the last three months of 2023, Farley said it’s planning to cut spending on larger EVs like trucks and vans in favor of smaller, cheaper models.

“We’re … adjusting our capital, switching focus onto smaller EV products,” he told analysts.

“All of our EV teams are ruthlessly focused on cost and efficiency in our EV products because the ultimate competition is going to be the affordable Tesla” as well as Chinese manufacturers, Farley added.

Ford’s commitment to EVs comes despite rising consumer anxiety about factors including their range, ease of recharging and resale value. Those doubts are prompting some manufacturers to focus more on hybrids instead.

Last month Ford said it was cutting production of its electric F-150 Lightning pickup truck once again due to falling demand.

‘Solid year’

Ford shares climbed 6% ahead of Wednesday’s opening bell as investors reacted to the better-than-expected revenue and profits.

Farley called 2023 “a solid year,” but told analysts that the Detroit automaker was still “nowhere near its earnings potential.”

Focusing on cheaper EVs could draw Ford into a battle with Tesla, which has made launching a mass-market car a priority as it slashes prices in a bid to undercut its rivals.

Elon Musk promised to make a $25,000 Tesla in 2020 and said on an earnings call last month that his company plans to start producing the vehicle, dubbed the “Model 2” and codenamed “Redwood” internally, in mid-2025.

China’s BYD has tended to focus more on affordability, an approach that helped it overtake Tesla as the world’s biggest EV seller last year. Its Qin compact sedan and Seagull and Dolphin hatchbacks are already among the best-selling cars in China.