The automaker said in a presentation to investors on Wednesday that it would add about $ 8 billion to its electric vehicle development spending this year through 2025. That brings the total spending to nearly $ 20 billion as Ford begins to develop and build batteries in a joint venture with SK Innovation of South Korea.
Under former CEO Jim Hackett, Ford has been criticized by analysts for moving too slowly on its turnaround and future vehicle plans. But those plans have accelerated under the leadership of CEO Jim Farley, who took over last October.
“Today is show, not time, for the Ford team,” Farley said at the start of the presentation.
Wall Street liked what he heard and stocks jumped $ 1.09, or 8.5%, to close Wednesday at $ 13.90, a level not seen in about five years.
Ford has announced two new electric vehicle platforms to handle pickup trucks, commercial vehicles and SUVs such as the Ford Explorer. He also said smaller vehicles in Europe would be built on the foundations of Ford partner Volkswagen. But company executives have not given details on when the new electric vehicles will go on sale.
Much of the 40% electric vehicle sales target will come from Europe, where the company has committed to converting its entire range of passenger vehicles to electric power by 2030.
The global auto industry and government policy makers are trying to switch from internal combustion to battery power in order to reduce climate change. Some European countries, as well as California, plan to phase out gasoline-powered vehicles, while President Joe Biden promises to spend billions on charging stations along with tax credits and discounts to inspire people to change. .
Ford Crosstown rival General Motors hopes to stop selling combustion vehicles by 2035.
In addition, Exxon Mobil shareholders voted on Wednesday to replace at least two of the company’s 12 board members with directors considered best suited to tackle climate change.
Farley said Ford’s financial performance has not been acceptable in recent years, but has accelerated its recovery plan and made progress in recent quarters. The company is now generating cash flow in order to grow the scale of its electric and commercial vehicle business, he said. Ford has predicted it will post a pre-tax profit margin of 8% in 2023.
The company also announced that it will create a separate business called Ford Pro that will focus on buyers of commercial and government fleets. He expects the company to generate $ 45 billion in annual revenue by 2025, up from $ 27 billion in 2019.
It also expects to have around 1 million vehicles capable of obtaining software updates over the internet by the end of this year. Ford says it will have more vehicles with this capacity than Tesla by July 2022. This opens up the possibility of additional revenue through driver assistance technology and digital subscription services, a market of 20 billion dollars by 2030, Ford said.
In the United States, Ford’s largest market, electric vehicles accounted for just 1.2% of Ford’s sales through April. Ford currently offers only one fully electric vehicle, the Mustang Mach-E SUV, but next spring it will have a fully electric F-150 pickup and a large battery-powered Transit commercial van on the roads. The company said 70,000 customers had deposited $ 100 deposits to reserve an electric F-150 within a week of its unveiling. Ford’s F-Series pickup is the best-selling vehicle in the United States
Ford said it is planning a new rear-wheel-drive and all-wheel-drive electric vehicle architecture to bring a new generation of high-selling vehicles, including a Ford Explorer electric SUV and other larger SUVs with two and three rows. of seats.
The company is also planning additional vans and pickup trucks based on the new architecture, and it expects a third of pickup truck sales to be fully electric by 2030, said Hau Thai-Tang, chief development officer. of the company’s products.
Chief Operating Officer Lisa Drake said that by making electric versions of its top-selling brands, the Mustang, F-150 and the Transit Van, Ford can bring bulk purchasing power to vehicles. that small startups can’t.
She said 70% of Mustang Mach-E electric SUV sales come from other automotive brands, proving that electric vehicles will help Ford increase sales.
Ford, she said, expects to reduce battery costs from today’s $ 140 per kilowatt hour to less than $ 100 by 2025 and to $ 80 by the end of this decade.
As an example of his turnaround plan in place, CFO John Lawler said international companies, including Europe, China and South America, lost more than $ 2 billion. dollars a year for the past two years, but in the first quarter had generated a profit of $ 500 million.
Lawler would not commit to when Ford would reinstate its dividend, which was suspended at the start of the coronavirus pandemic. He said the company is focused on investing in growth areas and will pay dividends “as soon as possible”.
The $ 8 billion in additional spending on electric vehicles would go to the joint venture with SK Innovation to develop and manufacture batteries announced last week. The company will build two North American factories to manufacture batteries for approximately 600,000 electric vehicles per year by the middle of this decade. The companies say they have signed a memorandum of understanding, but details on the ownership structure and factory locations have yet to be worked out.
This story has been updated to correct the fact that Jim Farley took over as CEO of Ford in October 2020, not August.