Jim Farley, Ford’s CEO, predicts that the cost of making electric cars will fall enough that automakers will compete to sell electric cars that cost about $25,000 for years to come. This currently corresponds to about 23,400 euros, but US car prices are given before taxes. Farley said at a conference that paying the $25,000 price tag would democratize electric cars.
“I think there will definitely be a major price war in our industry,” the manager said. However, the production of the electronic car is still much more expensive than the production of the car with a gasoline engine. Starting at about $44,000, a battery-powered Ford Mustang Mach-E costs about $25,000 more than a gasoline-powered Ford Edge. The battery alone costs $18,000, and the charger another $3,000.
Ford’s CEO said that with new battery chemistry that uses less expensive and scarce precious metals such as nickel and cobalt, significant cost reductions can be expected. In addition, the production of electric cars will take less time and labor, which will save more money. Ford also plans to cut distribution costs, which are $2,000 more per vehicle than electric vehicle leader Tesla. This should be achieved primarily through the lower costs of a smaller group of vehicles at local dealers and lower advertising costs. According to Farley, Ford could do without advertising for the sale of electric vehicles, such as Tesla, which currently cost between $500 and $600 per vehicle.
Farley said Ford is developing the next generation of electric cars to “radically simplify” the amount of labor required to assemble them. “Half jigs, half workstations, half welds, and fasteners are 20 percent less.” Because the electric car is a simpler product, Ford designs it to “drastically change” the effort involved in making it.
Farley explained that the new electric cars will also be designed for optimum aerodynamics so that they can use the smallest battery possible to achieve a longer range. Redesigning the body of an electric pickup to reduce wind resistance can increase the range by 120 kilometers with the same battery size. The extra range will reduce battery costs by $3,000. Optimizing the vehicle to have the smallest battery possible is a critical factor for Ford’s new electric vehicles.
The company also plans to increase profits by selling software services, including driver assistance and independent functions, that can be rented for a period of time or per kilometer. All of this will help close the $25,000 cost differential for electric vehicles, Farley said, and make profits even as raw material costs are expected to rise. In China, the largest market for electronic cars, a price war is already going on. The most popular car out there is the minivan from the domestic manufacturer Wuling, which costs about $ 8000.
Cost reduction will take some time
Farley acknowledged that the low price target level is a challenge because it will require many things to address at the same time. According to the director, next-generation electric cars that are being pushed for this purpose will be ready in 2026, when Ford will transform its factories to build electric cars and build new battery plants and new assembly plants in the USA. By that time, the company will secure the necessary raw materials and have a new battery chemistry.
“It’s going to take some time, but I’m pushing myself to make money from these vehicles,” Farley said. “It would be a good investment.” Ford’s president also confirmed at the conference that the company is working on an electric vehicle specifically for car-booking services like Uber. This product matches the brand’s other commercial offerings. He has not yet revealed any other details.
In March, Ford announced that it would create separate divisions for classic combustion vehicles and electric vehicles. This would make the electric mobility business in particular more efficient. At the same time, the Ford Pro commercial customer division will also become independent. The plans are based on the “Ford +” strategy introduced last year, whose investments will be increased by billions again.