“Elon Musk has really pushed the industry to embrace electrification,” says former Ford CEO Mark Fields. “The challenge here is how do you make money at it?”
Fields says that there will continue to be a large portion of internal combustion engines and that the shift to electric is going to take a long time and it’s going to take longer than people expect.
Mark Fields, former Ford CEO, recently discussed the impact of the shift to electric and autonomous vehicles on the big automakers:
The Shift to Autonomous and Electric Vehicles
We were moving in that direction and during that time period, the financial performance of the company was very good. What the team is dealing with now is trying to define that future and define what that transition is and it’s going to be. It’s going to be a challenge for the entire industry.
You’re coming to the point now where the cycle is ending so volumes are starting to fall off, interest rates are up so you can’t use incentives, whether it’s extended loan maturities or higher incentives and higher leasing to keep volume going.
The Challenge is that Electric Vehicles Are at a Lower Margin
Then there are two new unique things that the industry has never had to face before going into a cycle. One is they have to keep investing in electrification and autonomy. Secondly, when they introduce these electrified vehicles they’re going to be at a lower margin than internal combustion engines.
It’ll take probably five to seven years for cost competitiveness between a battery-powered car and an internal combustion engine car, so they’re going to have to deal with that environment. Every CEO across the globe is making sure that they’re working on their cost structure.
Elon Musk has Really Pushed the Industry to Embrace Electrification
What Elon has done is he has really pushed the industry to embrace electrification. When you drive an electrified vehicle it’s a fantastic experience, great power and torque. The challenge here is how do you make money at it? Elon’s challenge this next year is how do he and his team balance rolling out cheaper models of the Model 3 to boost sales but at the same time not sacrificing that commitment to attain sustainable profitability? That will be the challenge for him and his team.
Going to be a Large Portion of Internal Combustion Engines
I think at the end of the day Ford has down in the ranks a great team. They’ll figure it out. The market changes over time. When I was CEO the stock price was down. It was very clear the financials were terrific but the stock price was down.
I think this is going to be a long game that every OEM is going to be playing as you make this transition to autonomous and electrified vehicles. At the same time, there’s still going to be a large portion of internal combustion engines. This is going to take a long time and it’s going to take longer than people expect.