Ford’s Lincoln division told dealers this week that it would cancel plans for a battery-electric SUV that it was developing with startup Rivian, into which Ford had invested $500 million a year prior, Automotive News reports. The automaker cited the coronavirus pandemic for the cancellation of a Lincoln-badged electric sport utility, but indicated that the startup and the automaker would still pursue an “alternative vehicle” that would be based on Rivian’s skateboard platform.
Michigan-based Rivian captured headlines over the past two years with prototypes of a pickup truck and an SUV, both of which appeared far more traditional than similar plans by Tesla, but innovative in their own way. The planned Lincoln-branded SUV would have used a Rivian-developed skateboard platform designed to underpin a variety of large vehicles.
Curiously, Lincoln did not elaborate what aspect of the pandemic had caused plans for this particular model to be shelved: Demand for a vehicle in this segment in a very different economy over the next several years, Ford’s current financial health, an expected turn away from luxury models by the consumer market, or the difficulty of setting up a new assembly line in an unpredictable public health environment? Rivian itself has recently indicated that its own SUV and truck would also be delayed as a consequence of the pandemic.
While the Rivian platform would have offered a relatively quick way for Ford to bring an electric Lincoln SUV to market, perhaps a more important question is how big of a return such a model would have promised the automaker in the near future.
The cancellation comes at a remarkably perilous financial environment for Ford owing to conditions that solidified even before the the coronavirus pandemic began to pummel the industry.
In late February the company’s stock reached a level not seen since the 2009 financial crisis, following a $1.67 billion loss in the fourth quarter of 2019. In late March the automaker also saw its credit rating downgraded, losing its investment-grade status. This week Ford said it was expecting a $5 billion operating loss in the second quarter of 2020, after a $632 million pre-tax loss in the first quarter of the year. The company now looks ahead to a production restart in late May in a best-case scenario, but production is likely to relaunch in a very different consumer demand environment, damaged severely by millions of job losses, and one that could prove quite unfavorable to electric luxury vehicles in the near to mid-term.
The cancellation of a Lincoln-branded electric SUV, therefore, is unsurprising in the big picture sense, even before the pandemic inflicted a massive hit on car sales. Similar entries from Audi and Mercedes-Benz have been rumored to attract lower than expected demand in the marketplace since going on sale, while Tesla’s own Model X had been upstaged by a smaller and less expensive sedan model early on. In shifting plans to a different electric vehicle, Lincoln has perhaps judged that the segment is overpopulated by slower-selling luxury models with high price tags, and could present a very finite sales ceiling if it proceeded to production.
Indeed, the experience of electric SUVs in the marketplace has already surprised a number of automakers, with some now voicing skepticism over the market’s appetite for a high-priced electric luxury models. This skepticism has caused a couple of automakers to refocus on models designed to compete in price with similarly sized gas-engined vehicles, judging that the deep-pocketed early adopter period in the EV landscape would meet an end sooner than expected.
While Ford’s plans with Rivian roll ahead, the company is undoubtedly thinking hard about the sales prospects of electric models priced above $50,000 in the next several years, especially in an environment that appears assured to be defined by a severe economic downturn and nothing short of a collapse of oil prices in the near term.
Source: Read Full Article