At the end of May, the very personable Jim Farley – cousin of the late comedian Chris Farley – hosted his first Investor Day as Ford Motor’s CEO. The central talking point: the company’s latest turnaround plan, dubbed “Ford+,” is underpinned by a US$30 billion investment in EVs (electric vehicles) through 2025, up from the previous US$22 billion.
Ford, said Farley, expects 40% of its global sales to be EVs by the end of this decade.
“This is our biggest opportunity for growth and value creation since Henry Ford started to scale the Model T, and we’re grabbing it with both hands,” Farley told analysts.
Ford’s chief product platform and operations officer, Hau Thai-Tang, pointed to Ford’s Mustang Mach-E crossover as an example of where Ford aims to go with the Ford+ strategy. The Mach-E, a connected EV, is a bona fide hit, a legitimate rival to Tesla’s best EVs. The coming Ford Lightning EV pickup is another example of Ford’s EV future, one with serious profit potential and boasting more than 70,000 pre-orders to date.
Thai-Tang, a former chief engineer of the gasoline Mustang and one of Ford’s brighter lights of the past two decades, also said Ford’s EV business can be more profitable than the gas-guzzling F-Series pickup and a roster of SUVs (sport-utility vehicles) that deliver almost all of Ford’s income. In fact, subscription revenue tied to fast-growing connectivity services and the expected reduced cost of batteries would allow Ford to make the shift from old-time legacy carmaker churning out high-polluting and inefficient trucks to modern, 21st century transportation company built on multiple revenue streams and zero tailpipe emissions.
All of it sounded hugely promising.
During following weeks into early August, Ford’s shares had some bounce to them; the Ford+ story resonated. Still, Investor Day was taken with a grain of salt by many. Legacy carmakers have a history of making similar promises and projections, only to disappoint with the execution.
Moreover, by the summer, Ford planned to roll out a new version of an old nameplate – the all-new pickup-based Bronco SUV. The obvious question: will there be an electrified version of the Bronco to continue and build the Ford+ narrative?
Fair question. Farley and his colleagues discussed Ford’s new EV platform in the past, the one that would be the base for BEV versions of the Explorer SUV, Lincoln Aviator crossover and future “rugged SUVs.” Ford even teased us at Investor Day with a silhouette of a vehicle that resembled the Bronco. Surely, Ford was planning a Bronco EV.
Not so fast.
A Bronco EV might yet be announced, and it would buttress the company’s messaging about the importance of the Ford+ shift to EVs, artificial intelligence and connectivity services. After all, Bloomberg NEF is projecting that by 2040, two-thirds of global car sales will be electric. A Bronco EV would be a proof-point that Ford is repositioning itself as a forward-looking legacy carmaker. But no confirmation, yet.
Instead, Ford stepped all over its EV message with the launch of the new gas-guzzling Bronco. Fuel economy and emissions for the Bronco are terrible, an embarrassment in 2021. In short, this 2022 Bronco is the antithesis of a zero-emissions EV. The least efficient versions of the Bronco gulp down gas like it’s 1969 – 18 mpg (US) or 13.07 litres/100 km. Broncos with the manual gearbox are even thirstier.
Let me just recap: within weeks of touting Ford+ with all its promise of corporate responsibility in world struggling with wildfires from British Columbia to Greece; water rationing in 10 U.S. states; a seemingly endless stream of worsening hurricanes; rising sea levels; and, the world’s leading climate scientists warning that it is “indisputable that human activities are causing climate change,” Ford Motor pivoted from Ford+ to touting a boxy SUV designed to take on Jeep’s Wrangler. (By the way, you can now get a Wrangler EV, the 4xe.)
The obvious question: why no Bronco EV, or at least the promise of one?
Arun Kumar, managing director at consulting firm AlixPartners, explained to ABC News that automakers such as Ford need to keep churning out high-margin gas hogs to pay for Ford+-like transitions. Analyst Ed Kim told ABC News that Broncos and other gas guzzlers “print money” and in doing so they allow legacy automakers “to invest in EVs.”
Yes, trucks are spectacularly profitable for Detroit’s automakers and they remain extremely popular with a chunk of the buying public. The pro-Bronco argument goes like this: Ford and others are simply meeting demand for pickups and SUVs.
But in the broader context of that free-market stance, it’s worth noting that those pickup buyers are getting old, and they are almost all white men. In short, their days of driving sales and profits in the auto marketplace seem to be coming to an end.
According to Hedges & Company, the average age of the new F-150 buyer is 55 and 84% are male. White males purchase about three-quarters of all new Ford F-150s. According to the U.S. Census Bureau, the number of white males has been in decline for the past decade and that trend has escalated over the past three years.
Demographics are not always destiny, but the trends point away from old-time pickups. In any case, Detroit’s automakers have since at least the 1973 oil crisis told us that gas-guzzler revenue will pay for more fuel-efficient vehicles and ultimately EVs. In reality, automakers – Detroit’s in particular – have continued to churn out thirsty rigs in huge numbers. Their argument is always the same: this is what the marketplace wants.
Nonetheless, at the very least, Farley – a skilled and experience marketer – should have given a nod to his own company’s Investor Day focus with the launch of the new Bronco. If there is a future Bronco EV, Farley should have said so. That would have calmed the EV crowd, bolstered the Ford+ messaging and boosted interest in Ford among the future buyers highlighted in the Bloomberg NEF projections. What could be better than a Bronco EV as brand-builder for a transforming Ford?
This also would have caught the eye of investors who are increasingly chasing ESG (environmental, social and governance) opportunities. Ford shares have languished for years, in large part because financial markets – and the buying public — see Ford as an old-style automaking dinosaur headed to the tar pits. Ford+ started a conversation that was largely shut down by the launch of the Bronco, a boxy truck from a 118-year-old car company that makes EV promises but delivers gas guzzlers by the millions.
For now, the Bronco appears to be a hit with Ford’s aging customer base. Ford has racked up thousands and thousand of pre-orders. The Bronco will, most assuredly, help Ford increase its near-term profit margin from a paltry 2.2% in 2020 to a hoped-for 8.0% in 2023.
But in doing so, Ford with the Bronco has reinforced the company’s image as a hidebound automaker. Yet Farley himself says that Ford+, not the Bronco, is “our biggest opportunity for growth and value creation since Henry Ford started to scale the Model T.”
So, what is the essential story at Ford? Is Ford a legacy automaker mining profits from gas guzzlers? Or is Ford a 21st century transportation company with a plan to capitalize on this emerging “opportunity for growth and value creation” Farley highlighted in May?
What is certain is that Ford has undermined the long-term gains imagined in the Ford+ transformation plan – at least in terms of marketing and communications – for the Bronco’s short-term gain (in profits).
This is a mistake. Ford should address it by announcing a Bronco EV to compete with the Wrangler EV.