Written by Tom Krecher, Autos Writer at AP
DETROIT (AP) — The global auto industry is headed for a massive price war in the coming years as the costs of electric vehicles drop and many companies sell electric vehicles that cost around $25,000, the CEO of Ford said.
CEO Jim Farley told the Bernstein Strategic Decisions Conference on Wednesday that the $25,000 electric vehicle will democratize electric vehicles. He said the materials needed to build that car would cost about $18,000.
Farley pointed out that the cost of building an electric car at the present time is much more than the cost of one that runs on a gas-powered engine. The company’s Mustang Mach-E electric utility vehicle, which has a starting price of about $44,000 but can run much higher, costs about $25,000 more than a gas-powered Ford Edge, he said.
The battery alone costs $18,000, and the charger adds another $3,000.
But he said significant cost reductions are coming with new battery chemicals that use less expensive and rarer precious metals such as nickel and cobalt. Plus, building electric vehicles will take less time and labor, saving more money, Farley said.
He said Ford also plans to cut distribution costs, which are $2,000 more per vehicle than Tesla, the world’s leader in electric vehicle sales. This can be done to a large extent by lowering the expense of maintaining large supplies on a lot of distributors, and lowering advertising costs.
Farley said Ford, like Tesla, may not have to buy ads to sell electric vehicles, which are now worth $500 to $600 per vehicle.
Farley said Ford is designing the next generation of electric vehicles to “radically simplify” the labor it takes to put them together.
“Half the fixtures, half the workstations, half the welds, 20% less fasteners,” he said at the conference. “We designed it, because it’s a simple product, to fundamentally change manufacturability.”
He said the new electric vehicles will also be engineered for optimal aerodynamics so that they can use the smallest battery possible to get a greater range. Redesigning the full-size electric truck’s body to reduce wind resistance could add 75 miles (120 kilometers) of range from the same battery size, Farley said. The extra range cuts another $3,000 off the cost of the battery, he said.
“Re-engineering the vehicle to minimize battery size, as it is so expensive, will be a game-changer for these second generation products,” Farley said.
Farley said Ford has plans to differentiate itself and increase profits by selling software services, including driver assistance features and standalone features that can be rented for a period of time or a mile.
It all adds up to erasing the $25,000 cost difference and shifting profits, Farley said, even as raw material costs are expected to rise.
Farley said a price war is already taking place in China, where more than half of the world’s electric cars are sold today. The most popular of them, he said, is the truck made by the Chinese company Wuling and costs about $8,000.
Farley acknowledged that getting to that low price point would be difficult, with so many things to work on at once.
Farley said Ford’s first next-generation electric vehicle will be ready in 2026, as Ford refurbished old factories to build electric vehicles and built three new battery plants and a new assembly plant in Kentucky and Tennessee. By that time, the company will have lined up the necessary raw materials and had new battery chemistry in place, he said.
“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.”
In March, Ford said it would split its electric vehicle and internal combustion operations into two individual companies to speed up new technology.
Ford is planning a major restructuring with two distinct but strategically interconnected automotive companies — Ford Blue, which focuses on conventional combustion engines, and Ford Model E, which will develop electric vehicles.
Farley also confirmed Wednesday that Ford is working on an electric vehicle specifically designed for ride-hailing services like Uber, saying that the product will fit right in with Ford’s other commercial offerings. He gave no other details.
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