Ford Hedging Its EV Bet While GM Does Everything

Ford Motor Company (F 1.41%) shares its financial resources and hopes to choose a winner in the gas and electric vehicle category, while General machine (GM 0.03%) is to put everything on electricity. At first glance, GM’s bet looks better, but the Ford isn’t as far off as it seems at first glance.

Ford’s two division strategy

Earlier this year, Ford split its operations into two separate and arguably unequal divisions: Model e, which is responsible for electric vehicles, and Ford Blue, which is in charge of producing legacy internal combustion engine (ICE) vehicles. On June 2, the company announced a $2.3 billion investment in Ohio, Michigan and Missouri manufacturing plants to support production of electric vehicles, including the groundbreaking F-150 Lightning truck, E-Transit electric van, and new EV commercial vehicle. Under the restructuring of the two divisions, Ford will also invest $1.4 billion in legacy combustion engine-powered products, including the new Mustang coupe and Ranger pickup.

Ford invested in repairs and new jobs in Ohio, pictured, and elsewhere. Source: Ford Motor Company.

Ford’s split investment looks a bit misleading if you don’t consider other factors. It seems that the automaker is spending a lot of money on old technology, until you remember that it previously invested an additional $11.4 billion in EV and battery production, putting Ford’s balance far to the side of electric vehicles. And since Ford had more than $41 billion in cash and securities in its piggy bank as of March, the spending doesn’t appear to be an exaggeration.

However, industry watchers remain divided over the merits of Ford’s two-division strategy. Some prognosticators think it’s just a way to eventually scale back ICE production by gradually shrinking the Blue division while growing the Model e division. Once most passenger vehicles are electrified, the company can either close its Blue division or try to stay competitive in the diesel and gas powered segments, while focusing on the electric passenger vehicle market which will become increasingly competitive. Up.

Depending on both divisions could be a mistake. Ford sold its semi-heavy-duty business to Freightliner, and had no clear leadership position in the heavy-duty pickup segment. And while Ford seems committed to continuing to sell ICE versions of its 3/4 and 1 tonne pickups, GM has announced plans to make electric versions of these workhorse cars. Ford may eventually decide to end production of combustion-engined vehicles, but in the meantime, the company risks wasting resources on fossil-fuel products with a limited future.

GM abolishes fossil fuels

GM has less cash than Ford, about $26 billion, but it invests more in electric vehicles than its cross-town rival. GM has pledged to put $35 billion into electrification efforts by mid-decade, with $7 billion already spent on its Michigan EV production facility. The automaker said it will produce only zero-emission vehicles by 2035. Given the industry’s lead time of about six years for new vehicles, that’s only two production cycles. Some of GM’s divisions will be quicker to switch to electricity. Buick, while showing a new electric concept vehicle dubbed the Wildcat EV on June 1, said it would only produce EVs by 2030.

In January, GM chief Mary Barra said the automaker would have the battery cell capacity and vehicle assembly capacity to become the EV leader by 2025. In other words, GM plans to overtake Tesla in just three years. It’s bold — and more importantly, appears to be within GM’s reach.

EV investment looks like the best path for any automaker. To meet upcoming fuel efficiency standards, car companies will have to sell mostly electric, vehicles that have little in common with traditional ICE cars. Making two very different types of vehicles is expensive; when you use several of the same parts, and run different types of research and testing, you are missing out on many of the cost-cutting advantages of producing cars on a large scale. To stay cost-effective, automakers must use full-throttle electricity.

Going forward, industry watchers should compare the cost of Ford’s and GM’s EV batteries, and note how many products each can build on a single EV platform. To succeed in this emerging market, automakers must remain as efficient as possible.

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