Why Ford adjusted its electric vehicle strategy: hybrid vehicles cost less and can make money quickly
Tencent Auto News August 12 news, Ford has adjusted its electric vehicle strategy, betting that hybrid vehicles will become a bridge to the future of pure electric vehicles, and the whole process may take longer than most people expect. It's a cautious strategy that is supported by some Wall Street investors.
Ford CEO Jim Farley recently said the company is not considering the "extremes" between hybrids and pure electric vehicles. He said Ford decided to continue investing in heavy-duty hybrids and was surprised by their popularity. Farley also said Ford has no turning back when it comes to plans to expand electric vehicle production.
Despite the setbacks, the company, which revolutionized the automotive industry with the Ford Model T, is also determined to become a major player in the electric vehicle revolution. At present, the competition in the electric vehicle market is extremely fierce. Tesla dominates the industry, both in the U.S. and globally, and traditional automakers are struggling to figure out exactly how and how quickly they can catch up. Ford plans to sell 600,000 electric vehicles this year, but Farley, who has been Ford's CEO since 2020, recently announced that the company will push that goal back into next year. The target of 2 million by 2026 has been postponed indefinitely. Tesla sold 1.3 million electric vehicles last year.
Currently, every electric car sold by Ford is losing money, so why the plan changed doesn't seem mysterious. Although Ford released its latest quarterly financial data with generally stable earnings this week, the news of its push to sell electric vehicles quickly made headlines and sent the company's stock price down.
In an interview with the media, Farley denied any major shift in strategy, saying the reasons for the delay were "almost mechanical." "One of the biggest growth opportunities for us is our plant in Cologne, Germany, where we will launch the electric version of the Explorer," says Farley. "We are not satisfied with the heat diffusion of the vehicle. So we delayed the project for 6 months, which is the main reason. ”
The delay in launching the all-electric Explorer could have a significant impact on Ford's EV strategy, indicating that Europe plays a huge role in Ford's evolving EV strategy. European governments are pushing automakers to switch to electric vehicles, and electric vehicles are gaining popularity faster in Europe than in the United States.
Farley insists that Ford remains fully committed to the expansion of its electric vehicles. He noted that even the lower target for 2023 – 400,000 electric vehicles by the end of the year – is still four times higher than in 2022.
Sustained losses
Ford has been trying to make electric cars profitable. Last quarter, the company lost $1 billion in its electric vehicle business. Every all-electric pickup truck sold by Ford, the F-150 Lightning, is losing money — and that's before it lowered its list price by thousands of dollars this summer. Ford's choice to cut prices is to try to keep up with the price war caused by Tesla, because this price war is pulling down the price of electric vehicles.
Meanwhile, Farley, a former Lexus executive who worked at Ford for 15 years, said the next generation of Ford's electric vehicles will be profitable. He has previously described these future products that use different battery chemistries and more efficient manufacturing processes as "radically simplified."
So why is Ford expanding its electric vehicles in the near future? Why not wait and continue selling cars that make money? "It's strategically important for us to be the best-selling electric pickup," Farley said. "The first customers to buy our first-generation EVs will be the first to buy our second-generation EVs."
If Ford cedes the electric pickup market to Rivian, Silverado or Ram without a fight, it will put those profitable next-generation cars at a disadvantage. In the long run, a lot could happen: F-Series pickups would be Ford's most profitable product line.
Farley said electric cars have also attracted new buyers for Ford. "50 percent of F-150 Lightning customers are our new customers," Farley said. "We get customers we've never met before. This is very attractive for a company. Businesses are either growing or shrinking, and we want to be a growing company. ”
Not only does Ford want to get new customers for the second generation of the car, but it also wants to sell them subscriptions and software upgrades for years to come.
Strategic adjustment
Ford has invested billions of dollars in electric vehicles, but that doesn't mean it's making a massive turn. Unlike many competitors, including GM, Volvo and Honda, Ford has never publicly committed to completely stopping production of gasoline and diesel-powered vehicles.
In the interview, Farley made the case for adopting more efficient petrol and diesel-powered vehicles as part of the fight against climate change — an argument Toyota also made.
Most climate advocates say tackling the climate crisis requires zero-emission vehicles, not incremental improvements, especially since vehicles have long lifespans and can emit decades of carbon.
Farley believes a wider range of options will be necessary for customers driving large trucks, especially those hauling heavy loads over long distances. "Hybrids, plug-in cars, whatever it will be," he said. We can't just think of it as internal combustion and all electric cars – there are all these possibilities in between. ”
It's a rhetorical shift for Ford, which just last year completely separated its electric car development from its internal combustion engine, which is gasoline and diesel-powered vehicles. Ford split its business into two businesses: Model E, which focuses on electric vehicles and digital experiences, and Ford Blue, which focuses on making money from traditional gasoline- and diesel-powered vehicles. Ford Blue's profits are used to support the future of the Model E.
Hybrids barely appear in announcements; They were mentioned only once to clarify that they were part of Ford Blue's business. Although hybrids have gone unnoticed, they have been selling well at Ford, including the hybrid F-150 and the popular hybrid Maverick, a smaller and cheaper pickup.
In fact, "hybrids are easier to buy in today's environment," said Karl Brauer, an analyst at iSeeCars.com. "They're cheaper than electric cars and don't involve range anxiety, and Ford has managed to make them very practical in how to pair the technology with the F-150."
Hybrids are more expensive than diesel locomotives, but cheaper than electric vehicles because they have much smaller batteries, even plug-in hybrids. One-third of the cost of an electric vehicle is the cost of batteries. Brauer said hybrid cars have a more important advantage over electric vehicles — they can be produced and sold and profitable. (Mowgli)