If you’ve been interested in a smaller vehicle from the Ford Motor Company—say, a Focus or a Fiesta or a Fusion, something like that—you’ve unfortunately been out of luck for years now. Back in 2018, when gas was extra cheap, interest rates were low and no high-tech Chinese automakers were posting up in Mexico and waiting to pounce, Ford made a certain strategic decision to maximize profits. Under then-CEO Jim Hackett, Ford famously killed all of its cars in North America except the Mustang and Ford Focus Active, which was later canceled as well.

Ford’s move away from cars to focus on trucks and SUVs was called short-sighted by some critics, but it helped juice the stock price, and that is all that really matters.

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China’s automakers threaten American ones

China is so far ahead on EVs that it is seen as an existential threat by many American auto executives, including Elon Musk. Now, after years of profiting handsomely from gas-powered trucks, the American car companies face a very different battlefield. 

But the world of 2024 is somehow a radically different one than it was in 2018. And Ford’s current CEO Jim Farley is having to navigate that world by trying to achieve what’s probably the next big thing in the electric world: a small, affordable and profitable EV. 

Farley made clear that achieving those targets was “non-negotiable” while speaking at the Wolfe Research Global Auto Conference in New York this week. Here’s what he had to say, via Automotive News:

[…] “It’s non-negotiable that we’re going to allocate capital to a new affordable electric vehicle … and you have to make money in the first 12 months,” he said Thursday, recounting the message he gave his team. “And I don’t want a bullshit road map. I want, like, a real plan. And if you can’t [execute] that plan, we ain’t launching the car.”

Farley said the company made that decision because the economics on smaller vehicles makes more sense for consumers.

“What the customer has now said to us is, if you have [an EV] larger than Escape, it better be really functional or a work vehicle,” Farley said. “But if you do the economics for a vehicle, let’s say the Escape or smaller, it’s totally different, it completely works. In fact, it’s dramatically better operating cost than a Corolla or Civic or even a Maverick.”

Farley said smaller, cheaper EVs are needed to compete with Chinese automakers, which the head of Ford’s EV unit this week labeled a “colossal strategic threat.” Those companies sell large numbers of EVs in China and are expected to eventually enter the U.S. market.

All of this comes on the heels of Farley’s recent announcement that Ford has been working on a new low-cost, ground-up EV platform via a “skunkworks” team, probably to yield a small and cheap electric crossover that can do battle with Tesla’s upcoming cheap compact and the inevitable arrival of companies like BYD. 

But competing with the Toyota Corolla and Honda Civic that Farley mentions above isn’t something the American automakers have ever been especially good at, nor is it something they have really bothered with in many years.

Hackett’s 2018 decision to kill smaller cars to focus on trucks and SUVs—which aren’t much more expensive to make than small cars but can be sold for higher profits—was described at the time by CNBC as “bowing to short-term shareholder pressures.” Even if Ford conceded it was basically giving up the small market to the Asian manufacturers, the thinking was it would be fine, because it sold so many $60,000 F-150s and Expeditions. (Now that the EcoSport has been discontinued, the cheapest Ford you can buy is the Maverick truck at $23,815; good luck finding one at such a price.) 

And historically, American automakers like Ford, General Motors and whatever iteration of Chrysler existed at the time were never that great at small cars, anyway; they all got hammered trying to compete with Honda and Toyota in the 1970s when gas got expensive, and often turned to European or Korean subsidiaries and partners to make even half-decent compact cars like the Focus or Chevrolet Cruze.

The point is, the American automakers have generally always been best at size: huge, comfortable cruisers and pickup trucks. And in the years since the Hackett era, all of them have become rather addicted to the huge profit margins they get from trucks and SUVs. 

But that doesn’t track with what’s coming in the electric vehicle race for a lot of reasons. 

While 2023 saw record electric sales in America, the year also ended with the rate of adoption slowing as more and more buyers pushed back on EVs that cost more than their gas-powered counterparts and had more perceived drawbacks. (Most EV drivers will tell you those fears about range and charging are a bit overblown, but they remain very real barriers to wider adoption.) Moreover, super-high interest rates are discouraging people from buying the pricey cars and trucks they got used to in the late 2010s. And to top it all off, American automakers are increasingly realizing that trying to win with size—big, expensive EVs with big, expensive batteries—won’t be sustainable for anyone involved here.

Now, Chinese companies like BYD seem ready to strike in America, including with smaller, more affordable electric cars. And if EVs are to catch on here, it’s looking increasingly likely that a small, cheap Toyota Corolla-esque vehicle will help accelerate that trend. Will the American automakers even be able to compete that way? Do they have what it takes? All of those remain open questions.

None of this is meant as a dig at Jim Farley, who I think is doing all he can as CEO of Ford. He’s the one who kicked off the industrywide transition to Tesla’s NACS plug, has made great hires from Tesla and the tech world, and has been very clear-eyed about the costs of an EV transition and the threat posed by China’s automakers. 

But now Farley finds himself in the rather unenviable position of making sure the American auto industry can do something it’s never really been very good at doing: making great, competitive, profitable small cars. And ones that run on batteries this time. The alternative is that Ford and GM could throw in the towel and decide to be just gas truck companies—still profitable but less global and less ambitious than they used to be. 

There’s less of a future in that. But at least it will make the Wall Street analysts happy for a few more quarters, right? 

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