Ford CEO Jim Farley nodded to the impact of the Tesla Model Y on the mainstream EV market
Firm says mainstream buyers are unwilling to pay a premium for EVs, despite recent boom in popularity
A secret team of Ford engineers has been working for two years on a new platform for affordable electric cars, company CEO Jim Farley has revealed.
Speaking as the company released its fourth-quarter financial results for 2023, Farley said the company is “adjusting our capital [investment], switching more focus onto smaller EV products”.
He added: “This is important because we made a bet in silence two years ago. We developed a super-talented skunkworks team to create a low-cost EV platform.
“It was a small group, small team, some of the best EV engineers in the world, and it was separate from the Ford mothership. It was a start-up.
“And they’ve developed a flexible platform that will not only deploy to several types of vehicles but will be a large installed base for software and services that we’re now seeing at [Ford] Pro.”
Ford Pro is the company’s stand-alone commercial vehicle division, responsible for models such as the Transit and F-150.
Investment in higher-volume, lower-cost electric cars – likely destined to serve as indirect successors to the Fiesta and Focus – comes in response to Ford’s finding that most buyers are unwilling to pay over the odds to go electric.
Farley added that the availability of cheap credit pre-Covid and the pent-up demand for cars amid the semiconductor chip crisis, as well as the rapid rise in early adopters of EVs, “gave us too optimistic a demand signal”.
This drove a “temporary spike in supply” and Ford struggled to find buyers for the cars it had built as it realised that – after the early EV adopters were on board – mainstream buyers were not prepared to pay a premium to go electric.
“As the Covid shock retreated, we learned that as you scale EVs to 5000-7000 units a month and you move into the [majority of customers], they are not willing to pay a significant premium for EVs,” said Farley.
He hailed an impending “huge moment”, pointing to the rate at which prices of hybrids and electric cars are aligning in the US, once EV subsidies are factored into the equation.
US president Joe Biden’s Inflation Reduction Act last year introduced a $7500 (£6000) tax credit toward the purchase of an electric car. From this year, qualifying cars’ batteries must not use components sourced from ‘a foreign entity of concern’, which includes China and Russia.
The Ford Mustang Mach-E has become ineligible, owing to its use of a lithium-iron-phosphate (LFP) battery pack from China’s CATL. But were it eligible, it would start from $35,495 (£28,000) in the US – less than the combustion-engined Explorer (unrelated to the electric Explorer arriving in the UK later this year), Edge or Bronco SUVs.
Farley noted that Tesla “found this out first”, nodding to the immense popularity of the Model 3 and Model Y. The Model Y was the world’s best-selling car in 2023, according to figures published by industry analyst Jato Dynamics. It starts from $32,890 (£26,000), including the Inflation Reduction Act credit.
“We learned very quickly, and I want to say that no one will be immune to this reality,” said Farley.
In the UK, Ford currently sells only one electric car – the Mach-E. However, it will soon follow that with the new Explorer, as well as a new Capri and the electric Puma (now confirmed to be called Gen-E).
In the US, it sells the F-150 Lightning alongside the Mach-E.
