Ford Motor Company says it wants to be the Tesla of battery-powered commercial vehicles. To that end, it is building four new vehicle and battery manufacturing facilities in Tennessee and Kentucky. This week, it announced it would invest $3.7 billion to retool three existing factories in the Midwest, one of which will build a new electric commercial vehicle at an existing factory in Ohio, according to CNBC.
Ford already builds the E-Transit in Kansas City. The new factory in Tennessee is scheduled to build second generation F-150 Lightning electric pickup trucks. Just exactly what that third electric commercial vehicle might be, Ford isn’t saying, other than it will be available “mid-decade.” However, on Wednesday, Farley told the Bernstein Strategic Decisions Conference that Ford is working on an electric vehicle made specifically for ride-hailing services such as Uber, He said that vehicle would fit nicely into Ford’s other commercial offerings.
Ford still builds plenty of cars and trucks with internal combustion engines and is about to start production of the seventh generation Mustang. Despite slumping new car sales and supply chain issues, the company says it will add 6,200 union workers at those factories in the Midwest and will immediately convert 3,000 temporary workers to full time status, which will make them part of the UAW and entitle them to full benefits, including healthcare.
The current labor agreement with the UAW does not expire until September of 2023. It is unusual for a company to extend new benefits to workers in the middle of an existing agreement, but CNBC says the move may be a way of taking some of the sting out of Ford’s decision to build new factories in “right to work” states where unions are less powerful than they are in industrial states like Michigan and Ohio.
EV Price Wars On The Horizon
Ford CEO Jim Farley told the audience at the Bernstein conference that he expects that electric cars costing around $25,000 will be widely available by 2025. He added that the cost of making those cars will fall to around $18,000, which means even at those lower prices, they will be profitable to manufacture. “So I believe our industry is definitely heading to a huge price war,” Farley said.
Today, the battery alone costs around $18,000 and the onboard charger another $3,000. So what makes Farley so optimism? According to ABC News, Farley believes new battery chemistries are coming that will avoid such raw materials as cobalt and nickel, which have seen sharp increases in their prices this year. There are also new batteries that use sodium or sulfur in place of lithium, although they are not in mass production yet.
Cutting Costs At Ford
Like his counterpart Herbert Diess, CEO of Volkswagen Group, Farley envisions EVs that are much less expensive to build. Ford is designing the next generation of EVs for “radical simplification” of the labor it takes to put them together, Farley said. “Half the fixtures, half the work stations, half the welds, 20% less fasteners. We designed it, because it’s such a simple product, to radically change the manufacturability.”
They will also will be designed for optimal aerodynamics so they can use the smallest possible battery to get more range. Redesigning the body of an electric full size pickup truck for lower wind resistance can add 75 miles (120 kilometers) of range from the same size battery, Farley said, which cuts another $3,000 from the battery cost, he said. “The re-engineering for the vehicle to minimize the size of the battery, since it’s so expensive, is going to be a game changer for these second-generation products,” Farley said.
Ford also plans to cut distribution costs, which amount to $2,000 per vehicle more than Tesla. Much of that will come from cutting the expense of keeping a large supply of new vehicles on dealer lots and cutting advertising costs. At least for now, EVs are selling themselves, although that may not last forever.
Ford also plans to boost profits by selling software services such as driver assist and autonomous driving features that could be rented for a period of time or by the mile. It all adds up to erasing the $25,000 difference between electric cars and conventional cars even with raw material costs expected to rise, Farley said.
He admits getting to lower price points will be challenging, with many things needing to come together at the same time. Michelle Krebs, executive analyst with Cox Automotive, tells ABC News that Ford has a long way to go to reach the cost reductions that Farley outlined. “It sounds like a lot of things have to fall into place to make this happen,” she says.
The first of the next generation electric vehicles from Ford will be ready by 2026, Farley said, after Ford is finished with refitting those older factories to build EVs and building its new battery and assembly plants in Kentucky and Tennessee. By then, the company will have lined up the needed raw materials and have new battery chemistry, he said. “It’s going to take a little while, but I’m putting pressure on myself to get to making money on these vehicles,” Farley said. “It’s going to be a good investment.”
Jim Farley is tough, smart, and focused. He is exactly the kind of leader Ford needs to guide it toward the electric car future. He sees the challenges clearly and has a plan to address them. Of the three legacy American car companies, Ford seems most likely to survive the transition to battery-electric transportation.
Ford plans to manufacture 2 million electric cars a year by the middle of this decade and to dominate the market for electric commercial vehicles. Getting there won’t be easy, but Ford is putting its money where its mouth is. It seems to be more interested in moving faster and getting things done sooner than its crosstown rivals.
It’s emphasis on commercial vehicles is heartening. Most passenger vehicles spend 95% of their lives parked somewhere, whereas work vehicles are on the go more of the time and leaving more carbon emissions in their wake. Electrifying the commercial sector is vital to lowering pollution from the transportation sector, which is why Ford should be applauded for giving zero emissions alternatives for work trucks such a high priority.
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