Ford unveils plan to compete on price in electric vehicles

Jim Farley explains what Ford’s second-generation electric cars will look like: a simple and scalable new electrical architecture, smaller batteries, and full software control.

Ford responded to the war started by Tesla earlier this year by lowering prices for its best-selling electric car, the Mustang Mach-E, in the United States. The manufacturer has also increased its production to 200,000 units a year and those of the F-150 Lightning to 150,000. All these moves belong to a long-term strategy aimed at increasing its competitiveness and reducing prices.

The American manufacturer has no choice but to get down to work and do a ‘heavy job’ that includes the air transport of parts, which implies a high economic cost for the company. In its quarterly financial report, its top executives candidly pointed out that Ford has a disadvantage relative to the competition: It must improve its high costs relative to its sales benefits.

Increase prices or reduce costs

The good news for consumers is that Ford’s solution is not to raise prices. His answer is investing in the future. The firm will ensure that its cars, specifically the electric ones, will be simple and very easy to scale, and, at the same time, they will be ready to compete in a possible price war.

“We are now deep in the development of our second-generation electric vehicles, including a new electric pickup truck, which is incredible by the way,” says Farley, referring to the one that will be manufactured in “incredibly high volume” at the next BlueOval City plant in Tennessee.

Farley explained that these new EVs will be fully software upgradeable, which implies a completely new architecture. The CEO clarified that this should not be confused with the comprehensive vehicle platforms that are also being developed “and will be radically simplified: three body styles, each with volume potential of up to one million units, and only a handful of sortable combinations.

In short, higher manufacturing quality and a significant reduction in manufacturing costs, among other benefits. Ultimately, this will result in lower sales prices.

Fixed prices, new software, and more efficient manufacturing

Meanwhile, the company proposes new lines of business and innovations in the commercial strategy. An example of this is its no-haggle pricing program which will start in January 2024 and has already been adopted by almost two-thirds of dealers. “Starting next January, we will be selling electric vehicles in high volume with virtually no inventory; a simple e-commerce platform for our customers, a no-negotiation price set by the local dealer, and remote pickup and delivery,” Farley explains.

To keep up with demand, and as products develop, Ford will need to improve the company’s industrial platform, both in terms of its manufacturing system and in reducing engineering complexity.

In this sense, Farley wants to minimize the options for customers in terms of the type of vehicle, because “the design of different bodies that later have to be implemented on the same platform is very costly.” The “simplification must be radical”, with batteries as small as possible, with fewer supports and fastening systems.

Farley sees China as a serious competitor in the electric vehicle business. “At Ford, we have to wait for negative prices; and that means the software and other items become even more critical,” he adds. Ford’s upcoming fully upgradable electrical architecture will make a difference and add great revenue potential, Farley emphasized, “What we’ve learned with Ford’s fleet of professional vehicles is that we can make real money with software,” he concludes.

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