06/04/2023 08:30
Updated 06/04/2023 08:30
Ford has a firm commitment to electric mobility, but it knows the transition will be slower than many analysts expect. Everyone hopes that the real change will come when the prices of electric cars catch up with combustion. The gap is narrowing, but it’s still there. Each company sets a date for that expected moment. At Ford they have been very clear about this and its CEO, Jim Farley, has expressed what needs to happen for his company to achieve the much-desired cost parity.
With the advent of new technologies and production systems, the pace of production of an electric car has increased in recent years. Brands require higher volumes to improve profit margins. At Ford, they know what it’s like to make money with their electric division. Beginnings are rough and the Michiganders are willing to give it their all despite the odds. Last year, the Ford Blue division reported a loss of $3 billion. This year the figure is expected to fall, but no one believes that the gains will be realized.
Ford’s statistics regarding the electric car are daunting to say the least. With only 12,000 units registered in all markets during the first half of the year, the electrical division lost around 60,000 euros for each unit sold. Ford knows this, but it also knows that this is a long-distance run and not a spring, and that there’s a significant difference between a loss and a long-term investment. So despite the numbers, he doesn’t seem particularly worried about it. This year they will step on the accelerator and expect to be able to manufacture 210,000 units of their most popular electric car, the Mustang Mach-E.
The real problem lies in the cost of production of each unit. Raw materials have skyrocketed in their prices, as have electricity and transport rates. Electric cars are expensive to manufacture and global inflation doesn’t help narrow the gap with respect to combustion cars. The situation is delicate and for this reason, as reported by Reuters, Jim Farley believes that equalization of costs may not come until after 2030. This is one of the most pessimistic horizons we have seen in recent years. Many experts had expected that date to be brought forward to the middle of the decade.
The date is not random, as Farley himself admits. In his opinion, equality won’t come until second or third generation electric cars go into production early in the next decade. Improvement in manufacturing processes, optimization of resources, development of new technologies and higher demand for vehicles will be the turning point. From that moment on, the change would be apparent and, finally, Ford would be able to lock down the combustion model the way it does now.
Farley was not the first, nor would he be the last, to speak openly about price and cost parity. Renault Group CEO Luca De Meo does not believe the long-awaited equation is close. According to the French manager, the main problem is the batteries and the components they contain. “I can find better battery chemistry and better power electronics, but these benefits will be wiped out when the price of cobalt doubles in just six months.” To date, raw materials still represent 80% of the cost of battery manufacturing.
