The electric vehicle industry has seen explosive growth over the past several years as startups have jockeyed with established automakers for a leading position in the emerging EV marketplace. While pure-play EV companies have won over many investors, a number of industry stalwarts have doggedly pursued their own EV strategies. Such has been the case of Ford Motor Co. (F, Financial).
With 2021 drawing to a close, Ford is definitely still playing catchup in the EV race. However, it may not be playing catchup for long if Lisa Drake, Ford’s chief operating officer, is to be believed.
Catching up to rivals
In a presentation at the Goldman Sachs Annual Global Automotive Conference on Dec. 3, Drake laid out an ambitious roadmap that could see Ford leapfrog its rivals to claim second place among global EV manufacturers within the next two years.
According to Drake, Ford’s budding lineup of EV offerings is already gaining traction, with reservations for the forthcoming F-150 Lightning approaching 200,000, 75% of which are from first-time Ford customers. The all-electric pickup truck, which I have discussed previously, has clearly helped supercharge interest in Ford’s EV lineup, but it is far from its only offering. The Mustang Mach-E, which came on the market in December 2020, has also garnered significant attention. Indeed, demand has exceeded all expectations. On Dec. 10, the Dearborn, Michigan-based company announced plans to expand annual production of the model to 200,000 vehicles per year by 2023.
While Ford is clearly on track to see significant EV sales growth in the coming years, its goal of being the world’s second-largest EV manufacturer by 2023 is extremely aggressive. Tesla Inc. (TSLA, Financial) still has a comfortable lead globally, but other EV makers are closing the gap. Volkswagen AG (XTER:VOW, Financial) has designs on Tesla’s global EV crown and has already supplanted Tesla for the top spot in the European market, as I highlighted in another discussion.
Investing in the future
Ford is hardly the only automaker that is hungry for a bigger piece of the EV pie. Numerous automakers are gunning for the same spot, including Ford’s longtime domestic rival General Motors Co. (GM, Financial), which is working to build on the second-place position it currently holds in the American EV market. Even so, with plans to invest a total of $30 billion toward electrification by 2030, Ford is clearly willing to shoulder the costs of the transition.
To pull ahead of the likes of GM and Volkswagen, Ford will need a whole lot of batteries. According to Drake’s presentation, the company plans to reach 240 gigawatt-hours of battery cell capacity by 2030, enough to power about 2 million EV trucks and SUVs. That sort of capacity will not come cheap. As I discussed on Nov. 30, Ford has already committed $7 billion as part of a partnership with SK Innovation Co. Ltd. (XKRX:096770, Financial) to build a new battery factory that will deliver 129 gigawatt-hours of battery production annually.
Ford is also working on next-generation battery technologies, including solid-state batteries, which Drake said would be ready for commercialization "well before the end of the decade.” Seen as something of a holy grail of the EV world, solid-state batteries capable of mass-production and commercialization could have a profound impact on the industry.
My take
Ford’s early EV development efforts were marked by patient and deliberate planning. That understated approach has at last begun to bear fruit, in my assessment. With a whole range of new models coming online and a retooled production plan, the automaker has kicked its EV rollout into high gear. However, catching up to Volkswagen in just two years seems like a tall order to me, even if the F-150 Lightning launch goes off without a hitch next year.
The company's EV progress over the next couple years may define the long-term trajectory of its business. Its efforts are definitely worth keeping an eye on for anyone interested in the automotive sector.
