For months, Ford Motor CEO Jim Farley warned anyone who would listen that the electric vehicle transition was about to hit a wall, starting in September, when he predicted that the expiration of federal tax credits would cut the EV market in half. He said EVs would remain a “vibrant industry” but predicted they were “going to be smaller, way smaller than we thought.”
The turning point was what Farley called a “game changer”: the end of the $7,500 consumer incentive from the federal government, something that Farley saw cutting EV sales in the U.S. down to 5% of the industry from the current level of roughly 10% to 12%. (JD Power estimated that EVs represented 6.6% of new retail sales in January, suggesting the total picture is very close to what Farley predicted.)
On Tuesday, during Ford’s fourth-quarter earnings call, Farley presented the Detroit legacy manufacturer’s confirmation of his predictions: a $4.8 billion operating loss for the Model E electric vehicle unit. CFO Sherry House confirmed that the bleeding won’t stop there. The company expects the unit to lose another $4 billion to $4.5 billion in 2026, with the break-even target pushed back to 2029.
“The customer has spoken. That’s the punch line,” Farley told investors, validating his own grim forecasts with a balance sheet that shows the high cost of a market correction he saw coming. In a sign that Farley prepared the market well for this moment, Ford stock is up more than 27% over the past six months.
Prophecy fulfilled
In response to what he calls the “duty cycle” of the consumer, a shorthand for how, where, and for what purpose a vehicle is used that Farley has been using for years, he declared an end on Tuesday to the era of building EVs solely to meet regulatory targets. “We aren’t just building compliance vehicles at Ford,” Farley said.
Instead, the automaker is pivoting to a “high-volume, affordable end of the market,” specifically targeting the $30,000 to $35,000 price range where Farley notes EVs “have continued to thrive in America” without subsidies. This strategy stands in sharp contrast to the industry’s previous rush toward $75,000 electric trucks and SUVs—products that Farley had previously noted customers found “interesting” but too expensive.
The pivot, however, comes with a hefty price tag. Ford expects to record approximately $7 billion in special charges over 2026 and 2027 related to scrapping its old EV strategy and disposing of assets that no longer fit the new road map. In December 2025, Farley announced a $19.5 billion writedown amid the company’s pivot on EVs.
JD Power found in January that “affordability pressure remains significant” in the car sales space, with the average monthly finance payment reaching $760, up $24 from a year ago. “EV retail sales remain depressed as transaction prices jump through a combination of the elimination of federal credits and reduced incentives from manufacturers.”
Old habits pay the bills
While the EV division undergoes this painful restructuring, Ford is leaning on its traditional strengths to stay profitable. The company’s commercial division, Ford Pro, delivered $6.8 billion in Ebit for the year, effectively subsidizing the electric losses.
Farley also highlighted the growing consumer preference for “partial electrification,” a trend he spotted early, noting that Americans were “falling in love with” hybrids rather than pure EVs. On the call, he reported that Ford’s off-road performance trims and hybrids now account for more than 20% of the U.S. sales mix, providing “massive earning power” to fund the company’s future.
A ‘reset’ environment
The earnings call also highlighted the volatility of the current political landscape, which Farley has previously navigated with calls for consistency. He acknowledged a “partnership with the administration” and a “reset in the emission standards” as key factors for 2026. However, trade barriers remain a wild card; the company took an unexpected $1 billion hit in the fourth quarter owing to an “unexpected and late-year change in tariff credits for auto parts,” further complicating the financial picture.
For Farley, the 2025 results are a vindication of his caution. The initial EV gold rush is over, replaced by a smaller, tougher market that demands affordability over idealism. As he concluded on the call: “The customers in their duty cycle have spoken.”
