Ford Scales Back European EV Production and Workforce in Cologne

Ford Reduces European EV Production and Workforce in Cologne

Ford Motor Co. is implementing significant adjustments to its European electric vehicle (EV) operations, announcing plans to reduce its workforce by up to 1,000 employees and transition its Cologne, Germany plant to a single-shift production schedule by January 2026. This strategic shift is a direct response to considerably lower-than-anticipated demand for EVs across the European market.

Production Scale-Back and Workforce Adjustments

The decision entails scaling back production at the Cologne facility, which was previously a two-shift operation. The plant, a hub for EV production following a substantial $2 billion (or €2.3 billion) investment, currently manufactures the all-electric Ford Explorer SUV and Capri crossover on Volkswagen's MEB platform. The workforce reduction will primarily involve voluntary buyout packages. This move contributes to Ford's broader European restructuring, which has included plans to eliminate an additional 4,000 jobs across Europe by the end of 2027. Ford's total workforce in Europe stood at 28,000 as of November 2024.

Analysis of European EV Market Dynamics

The primary driver behind Ford's adjustment is the stark reality of EV adoption in Europe falling short of earlier projections. When the Cologne facility commenced EV production in 2023, new EV registrations in the region were expected to reach approximately 35% by year-end 2025. Current forecasts, however, project only a 20% market share. Through July 2025, EVs constituted just 15.6% of the European market. This slower growth is attributed to several interconnected factors: higher upfront vehicle costs, an inadequate charging infrastructure, and the inconsistent or withdrawn government incentives, notably the end of purchase subsidies in Germany. Furthermore, increased interest rates in the U.S. and Europe have made vehicle financing more expensive, dampening consumer willingness to invest in higher-priced EVs.

Broader Industry Context and Financial Implications

Ford's challenges in the European EV market are emblematic of a wider recalibration within the global automotive sector. The company's Model e (EV division) reported a $1.3 billion loss in the second quarter of 2025, contributing to a $2.2 billion loss in the first half of the year, following a $5.1 billion loss in the previous year. Ford has also faced substantial financial headwinds from tariffs, incurring an $800 million loss in Q2 2025 and projecting a $2 billion tariff-related cost for the entire year. The company's financial metrics reflect these pressures, with a low operating margin of 1.59%, a net margin of 1.7%, and a high debt-to-equity ratio of 3.56. A low Altman Z-Score of 1.01 places Ford in the distress zone, indicating potential bankruptcy risk within two years, while its return on invested capital (ROIC) of 0.89% remains below its weighted average cost of capital (WACC).

Other major automakers are also adjusting their EV strategies. General Motors (GM), despite achieving the #2 position in the U.S. EV market, anticipates scaling up EV production "much slower now over the next few years," citing a "massive seismic shift in EV demand, EV regulatory environment." GM expects margin compression due to $4 billion to $5 billion in tariffs this year and has revised its FY 2025 adjusted EBIT guidance downward. Similarly, Polestar, the Chinese-supported Swedish luxury EV maker, reported an "apocalyptic" $1 billion USD net loss ($1.5 billion AUD) in Q2 2025, attributed to tariffs, declining global EV demand, and intense competition, leading to a 95% stock value decline from its initial offering.

The European market, in particular, has seen fierce competition. Ford's overall market share in Europe stands at 3.3%, with sales increasing by only 0.7% in the first seven months of 2025. This contrasts sharply with Chinese EV makers such as BYD, which saw its European sales jump by 251% year-over-year in the same period. The broader trend indicates a global slowdown in EV sales, with growth projected to decelerate to 7.4% in 2025 from 48% in 2024, while hybrid vehicle sales have surged by 35% as consumers seek more affordable options.

Looking Ahead: Strategic Shifts and Market Evolution

The ongoing recalibration by Ford and other automotive giants underscores a crucial period of adjustment for the EV sector. Ford CEO Jim Farley has emphasized that future EV models must be both affordable and profitable from their first year. The company is actively pursuing the development of new, smaller EVs priced below $30,000 to cater to evolving consumer preferences.

The industry is responding to these market realities through strategic adjustments, including increased focus on hybrid technologies and joint ventures to de-risk investments and share technological burdens. The challenges highlight a need for automakers to align production with actual market demand and address consumer hesitancy regarding cost and infrastructure. As economic indicators, regulatory landscapes, and consumer preferences continue to evolve, the automotive sector will likely see further strategic shifts, potential consolidation, and a diversified approach to powertrain offerings in the coming years.