“We’re in the second inning of a nine-inning game.”
Ford President and Chief Executive Officer Jim Farley talked of the challenges Ford is facing during the shift to electrification today at the Morgan Stanley Sustainable Finance Summit. In his view, Farley sees the Chinese as the powerhouse Electric Vehicle brands going forward, potentially with enormous advantages in scale, which poses problems for other competitors. Then there’s the geopolitics involved, as well as the materials used in EV batteries, notably lithium and nickel.
“If you localize Chinese technology in the US – the customer is going to get screwed,” Farley said. The candid, tough talk comes at a time when Ford is investing more than $50 billion (2022 through 2026) in electric vehicles and battery components. Ford is on track to reach an annual targeted production run rate of 600,000 electric vehicles globally by the end of 2023, and 2 million by the end of 2026. Electric vehicles are expected to account for half of Ford’s sales by 2030.
Fairly cited a list of challenges that will require a strong corporate ethical culture – child labor, corruption concerning offtake agreements, among others. In his view Ford will need to physically monitor the sites to make sure this is done right, which is complicated and challenging. “Ford has as a good process as anyone in the industry. However, there is zero processing capability in US right now and permitting for mines can take ten years or longer.”
In Farley’s view, this is strikingly like what happened in the mobile phone market. “There’s a land rush to secure 100% of the materials for 2 million vehicles,” Farley said. Ford has four battery plants under construction right now, but needs the materials.
Moreover there “there will be losers.” In Farley’s view ultimately, it’s not batteries or EV motors, it’s the electric architecture or software that is most important. This also raises hard data, privacy and consumer protection risks. These are all new risks and Farley said, “we don’t know what we don’t know.”
Farley mentioned a compelling example. Suppose a rental car company wanted to use Ford’s telemetric data to charge for refueling or other charges? “Do we sell the data to the rental car company? What’s our contract with customers – how do you handle the data? Here, Farley cited what happened to Facebook. In his view, this is not the place for Ford to be too entrepreneurial. “We have to use data better, but some people don’t know what good looks like.”
“What changes need to happen in our behaviors. We were the first to innovate in full-size trucks. I’ve sold 100,000 Lightnings. Our competitors, who are snickering, haven’t. “People who use vehicles for work are more inclined to use technology than retail customers.” The Lightning now in its third year has increased price $11,000. “Meanwhile Tesla cut prices $7000. We are sold out… competition is going to get really exciting next couple of years.”
Ford Pro is what Farley calls Ford’s “secret weapon,” to help commercial customers lower the total cost of vehicle ownership and transform their enterprises with a leading lineup of specialized gas, hybrid and electric vehicles and increasing attach rates for productivity services, like prognostics and telematics.
More Farley Coming Tonight
At 5:30 p.m. EDT Jim Farley, CEO Ford Motor Company and Elon Musk, CEO Tesla to host Twitter Spaces chat on accelerating EV adoption in North America. Listen live on Twitter: @jimfarley98.
Despite stuttering production and the threat of weakening demand faced by automakers in Brazil, Chinese automakers are making strides in establishing localized production of their offerings in the region.
With the announcements of Great Wall Motor (GWM) and BYD Auto’s planned arrivals, the race is on to see which group can bring localized production of electrified Light Vehicles (LVs) before other players. Although production of electrified models has gradually been on the rise globally, the region is just beginning to open to the production of these models, with Brazil at the forefront. The optimistic goals from GWM and BYD have shaken up the region as the groups fight to establish production in the region sooner than the other, also pushing long-standing automakers to make moves of their own.
Using the strategy of acquiring previously owned plants, GWM and BYD have a lot of optimism in offering all-electric and hybrid vehicles to compete with the likes of Toyota’s Corolla and Corolla Cross. These Toyota models have historically made up most of the localized production of hybrid offerings in the country, until Chery introduced its mild hybrid versions of the Tiggo 5x and Tiggo 7 lines in 2022. Moving through the forecast period, we expect to slowly see additional hybrid versions of popular models sprouting up, reaching over 1 million units by 2030.
GWM hopes to produce all-electric and hybrid models in Brazil with 10 models anticipated to be launched in the next three years. It is expected that production will begin with the Great Wall Poer Midsize Pickup, followed by two SUV offerings: the Haval H6 and the Haval Jolion. The automaker’s initial goal was to begin production in 2023 at the plant previously operated by Mercedes-Benz in Iracemápolis, but this has already been pushed out to 2024. The Iracemápolis plant currently has a 20k unit capacity, which the OEM intends to increase to 100K annually over the next three to five years through a series of investments.
BYD is following the same strategy of acquiring a previously owned plant in Brazil, in this case Ford’s Camaçari plant, to establish localized production of its plug-in hybrids and electric vehicles. The process of purchasing the plant began back in 2022, and more developments are expected following recent news of an agreement being reached between the automaker, the State of Bahia and Ford. It is anticipated that production at Camaçari under BYD will begin at the start of 2025, kicking off with production of the Song Plus plug-in hybrid, with the hope of reaching 30k units of capacity in the first year and the intent to expand production to 150k units in the future. We also see the Dolphin Small Hatchback EV being brought into production and anticipate further announcements as it is likely additional models will be added to local production.
The gradual adoption of hybrids and EVs globally has been in the process for some time with unsurprising delays, and a similar story will likely play out in South America with added complexities. Despite the hopefulness shared by GWM and BYD, the region has its own risk of potential delays due to the current lack of infrastructure, demand, and the usage of ethanol as a gasoline alternative. In the region, Volkswagen has already faced delays to its anticipated MQB-A0 platform launch for hybridization which was initially expected to occur in 2024 but has been pushed out to 2025. With recent news of Stellantis’ anticipated 2024 launch of their new bio-hybrid platforms designed for electrification in South America, it is likely more automakers will join the race sooner than anticipated in hope of success in the region.
More announcements are guaranteed to come as the Chinese automakers push the region to catch up with adoption of localized production of electrified models, but only time will tell which automaker will triumph.
Matt Borucki is an Analyst, Americas Vehicle Forecasts at GlobalData. This was adapted from GlobalData’s dedicated research platform, the Automotive Intelligence Center
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