“We’ve got to place big bets” (Bill Ford, Jr.): OK, Then Launch An Electric (Not Hybrid) Mustang!

August 14, 20177 years ago Loren McDonald 0 Comments

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One of (among many) disappointing announcements from a major auto executive in recent years was in January 2017, when the CEO of Ford at that time, Mark Fields, promised hybrid versions of the company’s iconic Mustang and F-150 pickup — by 2022.

Yes, regular hybrids. And yes, roughly 5 years from the announcement. Was he serious?

Fields was replaced several months later, apparently for a variety of reasons, but it is rumored that a lack of progress on electric vehicles contributed to his dismissal. And rightly so in many observers’ opinions.

With a few exceptions, almost every major automaker in the world has announced plans to increasingly electrify their fleets. In some cases, the “electrification” strategy includes regular hybrids along with plans for fully electric vehicles (BEVs) and plug-in hybrids (PHEVs). In my analysis of announced and rumored future electric vehicles, roughly 60 could hit the US market alone by 2022, but with only one being a Ford — a pure electric SUV slated for 2020.

Ford — Go Fully Electric, Not Hybrid

Here is a radical thought, Ford, why not go all in and produce a fully electric Mustang? “Heresy,” you say? “Crazy. Never in your lifetime. Loren, how could you even dream of making the iconic ‘Pony,’ the ‘Stang’ with a battery and electric motor?”

Producing an electric Mustang, the car partially made legendary by Steve McQueen’s chase scene in the movie Bullit, would clearly mean the world has gone mad, right?

Before I explain why an electric Mustang may not be so crazy, a little background, courtesy of Ford and IHS Markit global automotive registration data:

Mustang expanded its sales lead in 2016 as the world’s best-selling sports car, with more than 150,000 Mustangs sold.
Overall global sales increased 6% over 2015, fuelled by non-US market growth up 101%, with almost 45,000 Mustang vehicles sold outside the US, including more than 15,000 orders in Europe. And 2016 was the first full year of the Mustang’s availability in Europe.
Mustang is the best-selling sports car in European markets, including France, Sweden, Poland, the Czech Republic, Hungary, Romania, Finland, and Greece.
Once available only in North America, the Mustang is now sold in 140 countries, with 6 more countries to be added in 2017.
Since launching in China in 2015, the Mustang has become the best-selling sports car in the world’s largest auto market. Mustang sales in 2016 were up 74% over 2015.
The Mustang has been the best-selling sports car in the US during the past 50 years.

Trends & Implications

There are a few trends and factors that potentially support launching a BEV version of the iconic Mustang:

Reasonable category strength: While global sales of sports cars declined 1.1% in 2016 versus 2015, according to JATO Dynamics, it was a smaller decline than most categories of sedans.
Growing global market share: The Mustang comprised 26.6% of all global sports car sales in 2016. The Mustang has now become a global car and is not just a US phenomenon.
High-growth markets are going electric: China and Europe provide significant future growth opportunities for the Mustang, but these markets/regions are also moving aggressively toward electric cars.
Declining US sales: YOY US sales of the Mustang through July 2017 are down 30% to 50,814 from 72,530 in 2016 for the same period, according to Ford Authority. Auto sales are down overall in the US, but one article suggests that some customers may be waiting for the 2018 model, expected later in 2017.
High (relative) non-US gas prices: The cost of gasoline (“petrol”) in many European countries is roughly double that of the US, according to GlobalPetrolPrices.com. For example, on August 7, the average price of gasoline in the US was $0.76 per liter, versus $1.50 in the UK, $1.43 in Germany, and $1.47 in France. The difference in China was less significant, but still roughly 24% higher than the US at $0.94 per liter. While muscle cars are seeing a resurgence (or new growth) in many markets, higher gas prices could put a damper on this growth.
Little to no electric sports car competition: Currently there aren’t any affordable pure electric sports cars on the market and perhaps only a few may be in the works and likely brought to market in the next several years.
Performance, electric style: As anyone knows who owns or has driven or ridden in a Tesla, electric cars are fun to drive and can be insanely fast and handle well. Those are perhaps three of the most critical criteria for sports cars, and a well-designed electric Mustang could live up to those requirements. Obviously, with one exception: the earlier mentioned unmistakable throaty sound of a big block Ford engine would be replaced with a whir and whoosh sound.

Ford Sales - July 2017 Ford Authority — US Ford Mustang Sales — 2014–2017 YTD. Source: FordAuthority.com

In my mind, these trends suggest that if Ford wants to continue growing sales of the Mustang, especially in non-US markets, it should strongly consider development of an all-electric Mustang.

“The role we’re in now requires us to stick our necks out,” said Mr. Ford, the company’s executive chairman, who has taken a more commanding role over the past year. “We’ve got to place bets. We’ve got to have a point of view about the future.” — Bill Ford, Jr., Executive Chairman, Ford Motor Co (Wall Street Journal)

While producing an electric Mustang probably sounds counterintuitive to a majority of car enthusiasts, there is some logic:

An electric “Stang” could provide a halo effect for the Ford brand and help it get back some of the “vision it lost.”
As Tesla has proven, its Models S and X fulfill a unique combination of both “conspicuous consumption” and “conspicuous conservation“ for buyers. With the same vehicle, you can convey a certain level of status and success and signal your greenness. Though the Mustang’s price does not put it in the luxury category, its muscle-car heritage clearly puts it in the “conspicuous consumption” category. An electric Mustang could open up a huge new market of buyers who desire the car, but not the guilt that comes with a gas guzzling engine.
The Mustang’s relatively small wheelbase of 107.1 inches puts it 6 inches shorter than the Tesla Model 3 (113.2 inches), possibly limiting it in the near term to a battery pack of around 50 kWh. This would keep costs reasonable, however. Also, because the Mustang is often a second car and typically not used for family vacation trips, a range of around 200–225 miles should satisfy most potential buyers.
An electric Mustang could sell especially well in car-loving markets like Southern California and perhaps reverse the current trend of declining US sales. Offer it as a convertible, and you have the perfect green car for “look at me” California buyers.
An “e-Stang” could potentially expand the market for the Mustang and pull buyers from popular sporty luxury models such as the Lexus IS and Infiniti Q60.
Unlike the unexciting styling of EVs such as the Chevrolet Bolt and Nissan LEAF, an all-electric Mustang might actually be able compete with the Tesla Model 3 for a certain type of buyer.
Like other muscle cars, including the Dodge Challenger (my dream car while in high school) and Chevrolet Camaro, a lot of consumers secretly desire to own a Mustang but can’t rationalize its purchase. For many of these “lost” buyers, a fast and green Mustang could be just the ticket to get them over the hump.
Ford could launch a luxurious Lincoln version, as a convertible, with different styling and model name to appeal to boomers who want to relive their younger years and dreams of owning a Mustang but now also want comfort along with their performance and greenness.
Because the Mustang, unlike most Ford models, has an aspirational element to it, Ford would have the ability to charge a premium for the electric version until battery pack prices reach cost parity with ICE platforms. Consumers will be more willing to pay a premium for an electric Mustang than they are a Fusion, C-Max, or Ford Focus.

Would An Electric Mustang Be A Risky Move For Ford?

Of course. The internal combustion engine is inextricably linked to the car. The sound of a big-block Mustang as heard in this video, makes a muscle-car fan’s heart race. For me, it is similar to iconic engine sounds such as those from Harley-Davidson and Ducati motorcycles. The sound will certainly be missed by many, but not the damage those engines cause to our planet and the health of humans.

But in the end, an electric Mustang is either inevitable or the car will fade in to history. It is just a matter of “when?” If Ford started today on the design of an electric platform for the Mustang, the earliest they could probably bring it to market is 2021. By that point, the majority of all new vehicles (excluding pickups) being designed or in production will likely be either BEVs and PHEVs, with regular hybrids being phased out.

We are already seeing this trend in California, for example, where sales of hybrids are declining and shifting to PHEV and BEV models. You could in fact make an argument that investing Ford resources to launch a hybrid Mustang might actually have a higher level of risk than producing a BEV version.

Even if Ford sold a decent volume of hybrid Mustangs for a few years, it would be a short-lived trend and the hybrid platform would likely never recover its investment. However, because of its relatively short wheelbase, an electric Mustang platform could potentially also be used for both small Ford and Lincoln SUVs and crossovers.

And, in fact, such a platform could provide Ford an opportunity to better compete with the German luxury automakers and launch a nifty Lincoln electric convertible and a competitor (albeit much shorter) to crossover coupes such as the BMW x4 and Mercedes-Benz GLC.

Ford could also install destination fast chargers at upscale resorts in key markets like California and Florida and test the waters in the auto rental market.

Could all of my ideas and logic simply turn out to be stupid or wrong? Could the market of buyers who are attracted to a muscle car like the Mustang simply reject an electric version like Coke drinkers soundly snubbed New Coke?

I would agree if an electric Mustang was launched in 2017, it could indeed bomb. But the US and global auto market will look very different in 2021, likely the earliest an electric Mustang could be brought to market.

My own forecast for 2021 pegs EVs percent of new car sales in the US at between 5% and 6%, but 20% in early-adopting California. And in markets like China, Germany, the UK, and France, EV sales could also be 10–20% of new vehicle sales.

But more significantly, these percentages should be significantly higher for the luxury, performance, and sport car segments. In other words, in the next 5–7 years, especially outside of the US, the Mustang’s competition will likely mostly be with BEV models.

Rather than looking at this potential transition to an electric Mustang as an end of an era, as a tearful goodbye to the end of one of the industry’s most iconic and successful “muscle cars,” Ford should embrace its chairman’s call to arms to “… stick our necks out … We’ve got to place bets.”