Ford’s Lucrative Transition to Smaller Electric Vehicles

March 29th, 2024 by

NYE Ford 2023 Ford Mustang Mach-E

Photo Source: Ford

During an earnings call in the fourth quarter of February 2023, Ford CEO Jim Farley discussed the company’s Gen-2 electric vehicle platform. To everyone’s astonishment, Farley revealed that the project was not developed by the Ford Model e electric vehicle division. Instead, it was outsourced to a talented skunk works team that worked separately from the automaker. 

The project aims to produce a flexible electric vehicle architecture allowing low-cost electric vehicles to compete with Chinese electric vehicle carmakers and Tesla. Farley emphasized the need to outperform automotive rivals, announcing, “All of our EV teams are ruthlessly focused on cost and efficiency in our EV products, because the ultimate competition is going to be the affordable Tesla and the Chinese OEMs [original equipment manufacturers].”  

Change in Plans

This marked a departure from Ford’s previous strategy, revolving around large electric vehicles such as the Mustang Mach-E and the F-150 Lightning. Ford’s pivot comes at a time when Chinese automakers like BYD are making progress in international markets with incredibly affordable electric cars. While these models are not currently sold in the United States, their aggressive pricing has sent ripples through the industry, prompting automakers to explore ways to offer more budget-friendly electric vehicles. 

The Blue Oval realized that the automotive market shifted to more affordable electric vehicle models at a critical moment when most carmakers could not produce their electric vehicles at cost. The Gen-2 electric vehicle models, on the other hand, should allow Ford to leverage economies of scale to make the compact electric vehicles profitable within one year from the production start.

It is worth noting that a Bloomberg Businessweek report claims that the manufacturer will utilize the all-new platform to build a small pickup truck, a compact SUV, and another electric vehicle model that could eventually be used as a robotaxi. The first vehicles are expected to arrive in the 2026 model year with a starting price tag of approximately $25,000 MSRP (Plus destination fee). This strategy mirrors what Tesla intends to do with its next-generation electric vehicle platform minus the electric pickup model. Tesla CEO Elon Musk first mentioned that goal in 2020. Thus, Tesla believes it will be ahead of Ford, with the production of the $25,000 MSRP (Plus destination fee) electric vehicle model expected to begin as soon as next year (2025).

Ford’s Good Fortune

That said, if Ford succeeds in selling a compact SUV for $25,000 MSRP (Plus destination fee) by 2026, it will be a phenomenal feat. Ford’s commitment to building an affordable but profitable electric vehicle is showcased by the fact that Jim Farley created a parallel team of engineers outside the company. Current information indicates that the team comprises fewer than 100 automotive engineers based in Irvine, California. Several come from Tesla, including the team leader Alan Clarke, who previously led Tesla Model Y engineering.

Further details reveal that Ford depends on lithium iron phosphate batteries to lower the prices of the upcoming electric vehicles. Lithium iron phosphate cells are up to 30 percent cheaper than traditional lithium-ion batteries, and Ford has experience using them for the base versions of the F-150 Lightning and the Mustang Mach-E. Moreover, the team explores other battery chemistries that could scale down costs even more.

If you support Ford’s unrelenting motivation, please come visit NYE Ford, where we can help sell your current vehicle or bring it back to life like new with an online service appointment to our service center. Allow our professional technicians to get started on all repairs or maintenance work.