Ford unveils strategy for affordable, compact electric vehicles to compete with Tesla and China

Ford Motor Co. is currently engaged in developing low-cost, small electric vehicles to offset the losses it has sustained in its electric vehicle division and to effectively compete with Tesla and the Chinese automakers.

Chief Executive Officer Jim Farley recently presented Ford’s adjusted earnings per share of 29 cents to analysts, surpassing the 13 cents that analysts had been predicting for the fourth quarter revenue. At $46 billion, the revenue also surpassed the predicted $40.3 billion.

Recognizing that the high price of electric vehicles has been a deterrent for mainstream car buyers, Farley shared Ford’s new strategy to recalibrate its EV production away from large, costly vehicles to focus more on smaller EV products. This strategy is aimed at developing a low-cost EV platform, and the small team working on this project is led by Alan Clarke, who previously worked developing models for Tesla.

The new EV platform will serve as the foundation for various types of vehicles, with the hope that it will generate a profit. Ford’s current battery-powered models experienced a $4.7 billion loss last year, and the company expects this loss to grow to as much as $5.5 billion this year.

Foreseeing that the ultimate competition will be with affordable Tesla and Chinese model EVs, Ford is aiming to make its EV products more cost-efficient, while balancing its EV spending with the production of traditional internal combustion engine models that generate profits to fund future growth.

In response to strong consumer demand, Ford has shifted its focus to hybrid gas-electric vehicles, expecting sales to grow by 40% this year. Despite its focus on EVs, Ford has also been investing in its traditional internal combustion engine business and commercial business, aiming to strike a balance between right-sizing to cut EV losses, managing increased pricing competition, and expanding margins.

Ford is also addressing the impact of a new contract with UAW, which is expected to increase labor costs for the company. GM, Ford’s crosstown rival, has predicted earnings before interest and taxes between $12 billion and $14 billion for the year, and it already possessed a healthier cost base in North America before signing a new labor agreement.

In 2023, Ford’s traditional internal combustion engine business earned $813 million, less than what was anticipated. However, its commercial business experienced greater earnings. Bloomberg Intelligence predicts that Ford Pro’s margins will expand this year, while the Ford Blue unit might experience margin pressure due to increased competition and pricing drops.

In light of all these challenges, it will be a test of Ford’s focus and determination to successfully navigate through the automotive industry’s transition to electric vehicles.