Ford’s chief executive says he expects the cost of building electric vehicles to fall to the point that in coming years automakers will be battling each other for sales of EVs priced around $25,000, reports Tech Xplore.
CEO Jim Farley told the Bernstein Strategic Decisions Conference on Wednesday that the $25,000 price tag will democratize EVs. Materials to build that vehicle will cost around $18,000, he said.
“So I believe … our industry is definitely heading to a huge price war,” Farley said.
It currently costs much more to build an EV than it does one powered by a gas engine, Farley noted. The company’s Mustang Mach-E electric SUV, with a starting price around $44,000 but can run much higher, costs about $25,000 more than a comparable Ford Edge gas SUV, he said.
The battery cost alone is $18,000, and the charger adds another $3,000.
But big cost reductions are coming with new battery chemistries that use fewer expensive and scarce precious metals such as nickel and cobalt, he said. Plus, EVs will take less time and labour to build, saving more money, Farley said.
Ford also plans to cut distribution costs, which amount to $2,000 per vehicle more than Tesla, the world’s electric vehicle sales leader, he said. That can be done largely by cutting the expense of keeping a large supply on dealer lots, and cutting advertising costs.
Ford, like Tesla, may not have to buy advertising to sell EVs, which now amounts to $500 to $600 per vehicle, Farley said.
Ford is designing the next generation of EVs for “radical simplification” of the labour it takes to put them together, Farley said.
“Half the fixtures, half the work stations, half the welds, 20% less fasteners,” he told the conference. “We designed it, because it’s such a simple product, to radically change the manufacturability.”
New EVs, he said, also will be designed for optimal aerodynamics so they can use the smallest possible battery to get more range. Redesigning the body of an electric full-size pickup truck for lower wind resistance can add 120 kilometers of range from the same size battery, Farley said. The additional range, he said, cuts another $3,000 from the battery cost, he said.
“The re-engineering for the vehicle to minimize the size of the battery, since it’s so expensive, is going to be a game-changer for these second-generation products,” Farley said.
Ford plans a major restructuring with two distinct but strategically interdependent auto businesses – Ford Blue focusing on traditional combustion engines and Ford Model e, which will develop electric vehicles.
Farley also confirmed Wednesday that Ford is working on an electric vehicle made specifically for ride-hailing services such as Uber, saying that product would fit well into Ford’s other commercial offerings.