Ford Has the Most Talked-About Electric Vehicle, But It Can’t Break Up With Combustion
America is the country of the pickup truck, and for decades the zenith of American pickup ownership has been the Ford F-150, the most popular vehicle on the road. Whether they have needed one to haul a trailer filled with construction equipment, or to just make a personal statement in the neighborhood, Americans have bought more or less 800,000 F-150s every year. For Ford, this has been a godsend — in 2019, the company earned about $42 billion from its F-series pickups, by far its most reliable revenue center.
So it was that Ford, along with President Biden, Jimmy Fallon, analysts and some journalists kicked up a fuss the last couple of days over the company’s unveiling of its long-promised electric F-150, called the Lightning. Biden floored the vehicle on a spin in Michigan, leading Fallon to plead with the company to send him one of the pickups so he could try it out, too. CEO Jim Farley said 20,000 orders had poured in during the course of just 12 hours, requiring a $100 deposit from each buyer. The New York Times suggested that the Lightning could become a best-selling new Model T for Ford, and Barclays analyst Brian Johnson, in a note to his clients, gushed, “F-150 Lightning is Lit.”
A certain crescendo has been reached in the global electric vehicle and battery race. Just this week, in addition to the F-150 unveil, South Korea’s Kia took over Times Square to trumpet its EV6 crossover SUV. Loath to relinquish the spotlight, Tesla CEO Elon Musk boasted anew about the coming Cybertruck and announced a June 3 coming out for the Model S Plaid, said to go 0 to 60 in under 2 seconds.
The strange thing is that it’s Ford that has gotten people the most worked up recently. Not that the F-150 isn’t impressive — it is, and it also seems clear that a good number of them will be snapped up. The disconnect is that, next to Toyota, Ford is probably more ambivalent about EVs than any major automaker on the planet. It does not seem an exaggeration to say that Ford is being dragged kicking and screaming into what appears to be shaping up as a new age of electric vehicles.
One of the primary scrambles of the EV age has been the creation of in-house supply chains — the automakers have sought to nail down raw materials at the mine, the various component parts, and especially batteries. The reason has been both cost and the concentration of some of the most important metals, such as nickel and cobalt, in unstable countries.
In this vein, GM triumphantly unveiled its custom-made Ultium battery in March 2020. Musk announced his first lithium-ion Gigafactory in 2013, and began to pump out batteries three years later. As for Ford, CEO Farley announced to Bloomberg in an interview yesterday, “We are going into the battery-production business.”
Meaning just now.
“We don’t think every traditional automaker dominant over the last number of years will make it through this transition,” said Sam Korus, an analyst with ARK Invest Management and a long-time Tesla bull. “Not just to electric, but to electric-autonomous. If Ford is just getting started on electric, it doesn’t lead me to believe they are anywhere near on their way to autonomous. They are definitely a laggard.”
The batteries, the nerve center of the EVs and the most expensive single component, seem particularly revealing as to Ford’s attitude. Last July, then-Ford CEO Jim Hackett told analysts that there was “no advantage” to owning its own battery factory. Other executives said the company simply didn’t foresee sufficient EV demand materializing to justify its own battery factory. But in its announcement yesterday, Ford said it had signed a memorandum of understanding with South Korea’s SK Innovation to build 60 GWh of battery capacity in the United States by the middle of the decade. A Ford executive said that is sufficient to equip 600,000 Mustang Mach-Es with lithium-ion battery packs. The company also said it foresees enough demand to build 120 GWh in battery capacity by the end of the decade in the U.S., and 240 GWh in all globally.
After the call, I asked a Ford spokeswoman to flesh out the battery announcement, but she said the company is not releasing more detail. The optics were of a hurried and extremely early attempt to pull together a coherent battery program.
In the same analysts’ call last July, Farley, then Ford’s chief operating officer, was asked by Adam Jonas, an analyst with Morgan Stanley, for guidance as to Ford’s future thinking. “How radically different is Ford Motor Company three years from now versus today?” Jonas asked. “What are some of the big, big changes, not the subtle stuff, the major stuff, that you want to highlight to folks on this call tonight?”
“You can expect Ford’s transformation to be in the areas that we’re already really good at,” Farley responded.
That much has not changed. In interviews this week, Farley suggested that the company will simply respond to the market with all its variations of the F-series — gasoline, diesel and electric models. In response to a question, he said Ford has no specific plans to stop selling combustion vehicles.
This may be precisely the right strategy — it could very well be that Tesla, GM, VW and the rest are wrong about the future. If they are wrong, it will be Ford — retaining its full combustion capacity, especially to produce its cherished F-150 — that wins the race.