Ford could go ‘all-in’ on all-electric vehicles under new leadership

By Fred Lambert , Elektrek, 21 Aug 2017 

76 Comments
Ford’s electrification plan has been disappointing to EV enthusiasts. They focused on hybrid vehicles and the company’s first all-electric vehicle built from the ground up to be electric is not expected to arrive until 2020.

But now an analyst sees an opportunity for Ford to go ‘all-in’ on EVs following the ousting of CEO Mark Fields and appointment of Jim Hackett.

Hackett replaced the EV leadership at Ford by bringing back a former Ford exec from Uber to lead electric and self-driving vehicles.

It’s still early in the new leadership, but Morgan Stanley analyst Adam Jonas just issued a new note to clients in which he conveyed a lot of optimism about electric vehicle prospects at Ford:

“We expect Ford to go ‘all-in’ on EVs. With an emphasis on pure EVs. Hybrids? Not so much. Prior management was vague with how its $4.5b investment in ‘electrification’ would be allocated. We are hopeful for a significantly upgraded level of transparency, given the pace of change in EV adoption and expenditure worldwide.”

The $4.5 billion investment that Jonas is referring to resulted in a plan to bring hybrid powertrains to a few of Ford’s existing models, but it was definitely lagging when it came to all-electric vehicles.

Only a new all-electric CUV was confirmed for 2020 and the automaker left the door open for more EVs to be announced.

While Jonas is bullish on EVs, he is not certain that investors will get behind such a strategy at Ford:

“We expect Ford’s next strategy to be more open to partnerships, new structures and entities, and a far greater emphasis on all-electric powertrains. However, we are not convinced investors are prepared for the required sacrifice to near term profit.”

Ford currently trades at just over $10 per share and Jonas assigned a price target of $9 per share. Tesla recently surpassed Ford’s market capitalisation as investors appear to have much greater confidence in the company’s future despite currently only producing every year a fraction of Ford’s total monthly vehicle production.

The Michigan-based automotive giant’s main profit center remains its F-Series trucks and interestingly, Ford recently opened the door to an all-electric F-150 pickup, but they seem to still need a push.

So Ford might have one EV by 2020, probably just announced because the year “2020” sounds futuristic. Meanwhile, Tesla will have 5: Model S, Model X, Model 3, Model Y, and Semi. These big auto makers are giving Tesla a massive head start; at what point will the light bulb flicker on and make the decision to try and catch up?

Ford exec: “Oh my god! Tesla stole 25% of our market share this year! We need to start producing EVs immediately!”

Ford Engineer: “Uh sorry sir, but we need batteries to do this. We don’t have any. I mean, we can build a couple prototypes but that’s it. And you need charging infrastructure, we also don’t have anything like that. Also none of our engineers are software guys. EVs are basically software with wheels.”

Ford exec: “Ok, lets double down on our Tesla smearing campaign while we build a big-a-factory and hire the geeks!”

For Engineer: “Mr. Exec, that’s GIGA-factory; and it will take us at least 5 years to build one. Also, all the good software guys want to work for Tesla, not us.”

Ford exec: “Crap! Crap! Crap! Call accounting and tell them they need to massage the numbers. Then call a board meeting so we can issue more stock, I want to cash out before we go under!”

 

It’s called a fast-follower strategy and it’s what the Big Boys do…
Tesla is a 00.1% market share player. By the time they get to 1% they’ll be on a dozen companies’ radar.
Or, more likely, windscreen.

Tesla is Betamax.

GM, Nissan, Benz, Ford will be adopting VHS.

Let’s see who wins!

 

Tesla is SSD! ;^)
You don’t have a clue if you think big auto could out compete Tesla.
They are losing market share and Tesla gaining 66%/yr.
The S has been out 7? yrs now yet doesn’t have a single competitor in production.
Plus Tesla’s costs are much lower as a lean company vs fat cats freaking out at big auto board rooms.

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Ford may be OK on the software side: “Ford to invest $1 billion in autonomous vehicle tech firm Argo AI.” That still leaves OTA and infotainment (is Ford Sync still using Microsoft?!) software. The rest of your points are spot on. Azure went bust electrifying the Ford Transit Connect, Ford could have picked it up cheap; now Deutsch Post is directing its electric delivery truck development! The PHEV Energi models have languished as a specialization of its OK hybrid models (that are lagging during cheap gas), rather than being Ford’s solution for AWD, economy, and performance. Ford still does not make a single EV in-house!

Go electric or die is the choice.
With Workhorse EV beating them so badly in large pickups, only Workhorse’s time to increase production saves Ford, GM, Dodge.
But there could be many more Workhorse, Tesla, etc coming up if Big Auto doesn’t want the market, others will take it.

Avatar

Go electric or die is the choice.
With Workhorse EV beating them so badly in large pickups, only Workhorse’s time to increase production saves Ford, GM, Dodge.
But there could be many more Workhorse, Tesla, etc coming up if Big Auto doesn’t want the market, others will take it.

“With Workhorse EV beating them so badly in large pickups..” Please define beating?

  • Efficiency, costs to run, doesn’t rust, weight less, less downtime, maintaining, parts so costs less to build, actually making an EV pickup Ford doesn’t, along with other
    details.
    Over it’s life with cost less than 50% of a similar F150 does in commercial service.

What Goes On In The Minds Of Auto Execs? August 13th, 2016 by 

I’ve had a lot of fun recently while highlighting 50 “tips” for slowing the electric car revolution and writing about what the end of gasmobiles could look like, but the discussions left some people scratching their heads. Why would automakers conscientiously try to delay a switch to electric vehicles? Why would they not try to create attractive electric cars once they are shown how popular Tesla’s models are?

I’ve written about this plenty of times, such as herehere, and here. The short summary is this:

A transition to electric cars threatens the “financial health” of conventional auto companies. Many shareholders would be pissed to see so much investment in gasoline car technology “wasted.” Executives who built their careers on engine expertise would become much less valuable. Automakers would have to shift much of their business strategy, operations, factories, and workers. They’d be tossing their highly valued patents & knowledge down the drain.

However, that’s all just a simple summary. It hit me that a more detailed theoretical rundown would help more people to visualize the problem — to understand why BMW is trying to compare the 330e to the Model 3 in advertisements, why Ford is boasting about rangeon a plug-in hybrid that has only 22 miles of electric range and is advertising its cars using Captain America, why most electric models sold in the US aren’t available in Florida (and most other states), why no automakers other than Tesla have cars with super-fast charging, why Chevy isn’t creating this car (which a consumer designed) and BMW isn’t creating this one (which a consumer designed), why Fiat’s CEO told people not to buy the Fiat 500e, why Toyota is still hyping hydrogen, etc.

So, let’s dive into a thought experiment.

Chevy Jolt

I’m not going dig through decades of investments from big auto companies, but below are some fake numbers from automaker “Bord” to play with in order to get rolling….

  • Bord has 84 factories
  • $84 billion has been invested into these factories
  • 18 of these factories (~21%) are engine factories
  • 6.5 million Bord vehicles were sold in 2015 for $150 billion in revenue and $7 billion in net income
  • Bord had a 6.5% automotive gross margin in 2015

Essentially, Bord is making 6.5 million vehicles a year ($150 billion in revenue, $7 billion in net income) using factories that it put $84 billion into (with $17 billion going into the engine factories alone). After adding in cash used for other overhead, operations, etc., Bord walks away with a healthy little profit each year and sends some of that back to investors.

The Groundbreaking Q3 2016 Bord Shareholder Letter

Now, let’s say that Bord’s CEO sees that electric vehicles are the future, that they’re already essentially competitive, and that the most logical thing for the long-term health of the company is to switch to electric vehicles fast. Mr. Constable C. Smuggins, CEO of Bord, tells shareholders in a shocking quarterly letter:

We are planning to switch over 100% to electric vehicles in the next 3–5 years. We would do it sooner, but it takes time to create these new EV models and ramp up battery production capacity. Doing it later would be stupid, because people won’t want to buy our gasmobiles in 5 years when compared with our electric vehicles or other automakers’ electric vehicles.

Unfortunately, this means that our engine factories (which we put $17 billion into) are soon going to be useless. Well, the land and building shells will still be useful, but nothing we currently have or do inside will be. These factories will have to be completely revamped to produce batteries and electric motors. In order to do that, we will need to invest another $17 billion. Actually, we will need to invest $33 billion on top of that $17 billion for additional battery factories in order to keep producing the same number of vehicles we sold in 2015. This is a good thing, because we will have a competitive advantage in the industry from our $50 billion worth of battery factories. Don’t worry about us choosing the right batteries and manufacturing machines, though — we’ve got this.

Our other factories will need to be reworked to support the many new models we are introducing based on new electric powertrains. That’s another $50 billion.

We have a cash balance of $50 billion. Quite a lot, eh? Unfortunately, that’s clearly not enough to cover this quick transition. (If we could somehow spread the transition outby 2–3 decades, that would be much easier, but we don’t see that as sensible.) So, we will need to borrow a lot of money, and we are going to cut off dividend payments for several years. No worries — we’ve got you covered in 2025 or 2030, and we know you are long-term investors who also care about humanity and want to see a quick transition to clean technology that stops costly and horrendous global warming, so we’re sure you won’t bail on us.

To be honest, though, we don’t know a lot about batteries and don’t have experience making compelling electric cars, so we hope we don’t screw up too much while pouring $150 billion into this. (Oh, did I mention that we need to do some massive staff re-training, R&D, set up new supply chain partnerships, license new tech, and acquire a bunch of patents?) By the way, yeah, um, our thousands of engine-related patents are basically useless now, so we’re just going to toss them in the trash.

I know you’d rather get a few more dividend payments before we jump in, but frankly, everyone in the industry sees the light and is now going to do this, so we have to get moving.

Back to Reality

Yeeeeah … most shareholders of Fiat-Chrysler, Ford, BMW, Nissan, Daimler, GM, Toyota, Hyundai, and Honda wouldn’t be thrilled to hear such plans, and many would try to stop the move. (Volkswagen is getting away with something slightly approaching this thanks to the pickle it landed in by being a massive cheater and liar. Lucky VW!)

Overall, the question is: If you’re in the shoes of these large automakers, how do you dump your huge investments (sunk costs) and competitive advantages (which are centered around the internal combustion engine) in order to jump head first into a new technology? How do you tell shareholders that you’re going to go from making billions of dollars a year in profits to borrowing money for several years? How do top executives who built their careers on engine expertise suck it up and say that it’s time to retire the old dirty beast under the hood? Tough questions.

I know I demonize automakers a lot for doing a horrible job on their EV efforts and promotion, but it’s not really about demonizing them — the goal is to push them into a better approach, and to help inspire other consumers to do the same. But when you look at the challenges they face, this simplistic idea becomes less potent. That leads into a topic for a coming article — how I think these companies can and should proceed. First, though, I never got to the main question in the title: “What goes on in the minds of auto execs?”

Who the hell knows? These people vary in personality, career focus, and culture quite a bit. How much they understand that electric cars are the future, how much they understand the existential threat electric cars present to their businesses, how much they consciously think through the finances or run spreadsheets on the matter, how much they care about global warming and air pollution, and how much they genuinely try to delay an electric car revolution probably vary a great deal.

If you find any more interesting tidbits on how any of their minds work and what they are thinking, drop us a note. In the meantime, fanboy/fangirl or not, I think you have to give some thanks to Tesla Motors. If Tesla wasn’t around, the transition would be going much more slowly, the plans of automakers would be even much worse, and there’d be a lot less inspiration in this market and in the world in general. Thanks, Tesla!

Related:

50 Tips For Slowing The Electric Car Revolution

The Shift To Solar, Wind, & Electric Vehicles Is Too Monumental To Overstate

Tesla Gigafactory 1 — Honestly, What’s The Big Deal? (At Essence, It’s Not The Numbers)

What’s Actually New In The Electric Car World?

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