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Ford CEO predicts steep fall in cost of manufacturing EVs with tough competition among automakers



Ford’s chief executive says he expects the cost of manufacturing electric vehicles to drop to such an extent that in the coming years, automakers will compete with each other to sell EVs priced at around $25,000 (roughly Rs.19 lakh). Will fight with

CEO Jim Farley told the Bernstein Strategic Decision Conference on Wednesday that the $25,000 (roughly Rs.19 lakh) price tag will democratize EVs. He said it would cost about $18,000 to build that vehicle.

“So I believe our industry is definitely headed for a major price war,” Farley said.

Farley said it currently costs a lot more to build an EV than one powered by a gas engine. He added that the company’s Mustang Mach-E electric SUV, which has a starting price of around $44,000 (approximately Rs 34 lakh) but can run a lot, will cost around $25,000 (approximately Rs.19 lakh) compared to the Ford Edge gas SUV, he said. Rs.) is more.

The cost of the battery alone is $18,000 (approximately Rs 13 lakh), and the charger adds another $3,000 (about Rs 2 lakh).

But big cost reductions are coming with new battery chemistries that use less expensive and rarer precious metals such as nickel and cobalt, he said. In addition, EVs will take less time and labor to build, and save more money, Farley said.

He said Ford also plans to cut distribution costs, which are $2,000 (about Rs 1.5 lakh) more per vehicle than Tesla, the world’s electric vehicle sales leader. This can largely be done by keeping large supplies on dealer lots and cutting advertising costs.

Ford, like Tesla, may not have to buy advertising to sell EVs, which now range from $500 (about Rs 38,800) to $600 (about Rs 46,500) per vehicle, Farley said.

Ford is designing the next generation of EVs for the “radical simplification” it takes to put them together, Farley said.

“Half fixtures, half work station, half weld, 20% less fasteners,” he told the conference. “We designed it because it’s such a simple product that it’s meant to fundamentally transform manufacturing efficiencies.”

The new EVs will also be designed for optimum aerodynamics so that they use the smallest battery possible to achieve greater range, he added. Farley said redesigning the body of the electric full-size pickup truck to have less wind resistance could increase the range up to 75 miles (120 kilometers) from the same size battery. That added range cuts a further $3,000 (about Rs 2 lakh) off the cost of the battery, he said.

“Re-engineering to reduce the size of the battery for a vehicle, because it is so expensive, is going to be a game-changer for these second generation products,” Farley said.

Ford plans to differentiate itself and boost profits by selling software services, which include driver-assistance and autonomous features that can be rented for a time period or miles, Farley said.

All of this adds up to offset the $25,000 (about Rs 19 lakh) cost gap and make profits with increased raw material costs, Farley said.

Farley said a price war is already raging in China, where more than half of the world’s electric vehicles are sold. He said the most popular one is a van made by Chinese manufacturer Wuling which costs around $8,000 (roughly Rs.6 lakh).

Farley acknowledged that reaching the low price point would be challenging, requiring multiple things to work at once.

Cox Automotive executive analyst Michelle Krebs said Ford has a long way to go in reaching the cost cuts outlined by Farley.

“It seems like a lot of things have to fall into place to do that,” Krebs said.

Ford has faced quality control issues with many of its new vehicles in recent years, driving up costs.

But building the $25,000 (around Rs 19 lakh) electric vehicle will attract more buyers to the EV, which US President Joe Biden’s administration is banking on to cut planet-warming greenhouse gas emissions. Research has shown that price is now the biggest barrier for people making the transition from internal combustion engines, Krebs said.

The first of Ford’s next-generation electric vehicles will be ready in 2026, Farley said, as Ford refits old factories to make EVs and builds three new battery plants and a new assembly plant in Kentucky and Tennessee, he said. Told. He added that by then, the company would have supplied the required raw materials and would have new battery chemistry.

“It’s going to take a while, but I’m pushing myself to make money on these vehicles,” Farley said. “It’s going to be a good investment.”

In March, Ford said it would split its electric vehicle and internal combustion operations into two separate businesses to accelerate new technology.

Ford is planning a major restructuring with two separate but strategically interdependent auto businesses — Ford Blue focusing on conventional combustion engines and the Ford Model E, which will develop electric vehicles.

Farley also confirmed Wednesday that Ford is working on an electric vehicle built specifically for ride-hailing services like Uber, adding that the product would fit nicely into Ford’s other commercial offerings. He did not give any other details.