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Ford CEO anticipates EV price war, shakeout to favor China, and industry consolidation

Ford CEO Jim Farley sees the automotive business “headed to an enormous value battle,” with the concept of “democratized EVs” coming quickly. 

The feedback have been made inside a dialog with analyst Toni Sacconaghi, as a part of Bernstein’s thirty eighth Annual Strategic Choices Convention held earlier this week. 

In it, Farley took just a few positions which might be doubtless to present a few of the Detroit institution heartburn—like how the auto business is about to be rattled by value pressures, a shakeout that might favor China, and a doubtlessly abrupt consolidation of car makers. 

Ford CEO Jim Farley

“The previous OEMs completely will get consolidated,” stated the Ford CEO. “Lots of the small gamers can not afford to make this transition; lots of them usually are not investing in embedded software program and electrical architectures, which is the center of this transition.”

Working value over sticker value

Tesla CEO Elon Musk earlier this yr stated that the corporate isn’t engaged on the $25,000 Tesla it centered its total Battery Day presentation round in 2020, suggesting that robotaxis will make it much less essential. 

Farley adopted with a model of that place, saying future Ford merchandise may not be primarily based across the lowest materials prices (and sticker value), however round optimizing the overall possession value. And that is likely to be for a very totally different use mannequin. 

2021 Ford Mustang Mach-E

2021 Ford Mustang Mach-E

No one has but constructed a product for the 1.3 million Lyft and Uber drivers optimized for low operational prices, he famous. Though there’s one exception to that we should always level out: UK’s Arrival, which confirmed a prototype of an electrical MPV late final yr.

Assembly Chinese language makers on margins

A number of the Chinese language EV makers are managing greater margins with decrease costs. Farley pointed to the lithion-iron phosphate battery chemistry—and its value of about 20% lower than different lithium-ion chemistries—as one risk to assist get there. However he underscored that the simplification of labor content material goes to be an enormous side for chopping value. 

Reengineering of automobiles will assist effectivity and thus assist decrease the dimensions of battery packs. He has recommended that is already underway within the Mustang Mach-E, incrementally.

2021 Ford Mustang Mach-E electric powertrain

2021 Ford Mustang Mach-E electrical powertrain

We’ll additionally see extra optimization for aerodynamics. A full-size pickup truck optimized for aero, versus an F-150 Lightning, means 75 miles in further vary, Farley appeared to counsel, including that “it’s sort of too unhealthy that the Lightning finally ends up being our most profitable automobile at the moment as a result of it feels so spinoff from the F-Collection.”

“It’s not our solely truck and the opposite vans received’t look something prefer it,” he added—maybe referring to the full-size electrical truck for “extremely excessive quantity” due in just a few years. 

Direct to client, no stock: What dealerships?

The highest government additionally isn’t satisfied Ford wants public promoting for the automobiles developed and bought beneath its Mannequin E enterprise. He added that Ford needs to be doing experiential advertising and marketing like automobile birthday updates somewhat than Tremendous Bowl adverts. 

Ford Mustang Mach-E GT Performance Edition

Ford Mustang Mach-E GT Efficiency Version

Farley additionally says that Ford must go to non-negotiated pricing and 100% on-line, with no stock, and direct-to-consumer pickup and supply. 

Parsing that time, Farley isn’t speaking about eliminating sellers however making them one thing utterly totally different than what they’re now. “We’re working with our sellers as we communicate via this,” stated Farley. Though on the industrial facet, the CEO famous that sellers “wind up being our strongest factor.”

Ford retailers will grow to be extra specialised, with “a number of tiers of sellers,” and a plan to make use of the bodily presence of dealerships to outperform Tesla. 

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