Ford (F) assembled a “super-talented skunk works team” to build a low-cost EV platform. The small team consisted of “some of the best EV engineers in the world,” according to Ford’s CEO Jim Farley. It will be used to launch several new software-defined electric models.
Ford is “secretly” developing a low-cost EV platform
Following Tuesday’s Q4 and full-year 2023 earnings results, Farley explained that Ford is adjusting its capital while switching gears to focus on smaller EVs.
Ford’s leader said on the company’s earnings call that the company made a bet in silence two years ago to develop a low-cost EV platform. Ford put together a small team with “some of the best EV engineers in the world.” The project was separate from Ford’s main operations.
Farley described it as “a start-up.” The team developed a flexible platform that will be used to launch several types of vehicles (is an electric Maverick finally coming?).
Not only that, but it will “be a large installed base for software and service,” as seen at Pro, its commercial unit.
The move to launch affordable EVs comes as several rivals announced they will do the same. Farley said Ford’s “ultimate competition is going to be affordable Tesla and the Chinese OEMs.”
According to Ford’s CEO, customers are unwilling to pay a significant premium for EVs. For this reason, Ford is leaning into hybrids as a bridge to its next-gen electric models.
Slowing EV investments and pace
Ford’s Model e electric vehicle business lost $4.7 billion last year. The company said growing losses were due to “extremely competitive pricing” and investments for its next-gen electric models.
Although EV volume was up 20% (mainly from the F-150 Lightning), Ford lost about $47,000 per EV built in the last three months of 2023.
Meanwhile, Ford’s hands-free BlueCruise driving passed 150 million miles, up 25% from Q3. BlueCruise gross margins are at +70% as Ford doubles down on software-defined vehicles.
Ford Pro is a nearly “$60 billion high-margin hardware, software, and physical services business” with mostly recurring revenue. The unit doubled its operating profit to $7 billion last quarter and is on track for “mid-teen EBIT margins.”
Ford expects its Model e EV business to continue losing money with an operating loss of $5 to $5.5 billion this year.
Ford’s move to develop a low-cost EV platform comes after several rivals, including Tesla, Volkswagen, Hyundai, Kia, Stellantis, and others, have announced similar plans.
The company is taking what it learned with its first-gen models to improve efficiency with new models rolling out.
Ford is launching the electric Explorer in Europe. It also plans to launch a new full-size electric truck and three-row SUV for the US market as part of its next-gen EV lineup.
Ford is coming off a record EV sales year, with the F-150 Lightning topping the Rivian R1T to become the best-selling electric pickup. The Mustang Mach-E was the second best-selling electric SUV behind Tesla’s Model Y, while the E-Transit was the top-selling electric van.
Despite the success, Ford is delaying around $12 billion in EV spending as it aligns production and inventory for customer demand.
A new platform for affordable EVs would likely greatly improve Ford’s ability to compete with EV leaders like Tesla and BYD.
In December, Tesla’s CEO Elon Musk said that the upcoming low-cost Tesla model ($25,000) is “advanced” in development. The Tesla Model 3, its cheapest EV, starts at $38,990 (excluding incentives and savings).