Hau Thai-Tang is executive vice president of product development and purchasing for Ford Motor Company. Recently, he sat down with John McElroy, host of Autoline This Week, to discuss his company’s plans for the future. Joining the discussion were Keith Naughton of Bloomberg News and Mike Martinez of Automotive News. Ford has taken some (well deserved) criticism in the past week for loading up its stand at the Detroit auto show with trucks, trucks, and more trucks. If Ford has a plan to sell electric cars, you wouldn’t know it from the vehicles the company put on display in Detroit.
Hua is a pretty smart person and he obviously has given a lot of thought to the future of the company he works for. Autoline is a video-only news source, but Hua’s comments were abstracted by Seeking Alpha.
No Gigafactory For Ford
Asked if Ford is planning to build its own battery factory to rival Tesla’s Gigafactory, Hua said his company thinks it is a bad idea for several reasons. First, there is not yet enough demand for electric vehicles to justify the enormous investment it would take to build a battery factory. He believes it is smarter to let battery companies do the heavy lifting in that regard, as they can spread the costs among several customers. [Editor’s note: This claim of “not enough demand” is one I always find particularly odd and irritating. Approximately half a million people put down a $1000 reservation for a single electric model — the Tesla Model 3 — years in advance. That is unprecedented not just in automobile history, but in all of consumer history if you look at the total scale of the reservations and eventual purchases involved. Imagine how much demand there would be for electric vehicles if other companies planned such compelling electric vehicles! Of course, such models are only possible if someone plans to mass produce the batteries at the requisite scale.]
Second, Hua said he thinks there is considerable risk that new battery technologies — he mentioned solid-state batteries specifically — could rapidly make a lithium-ion battery factory obsolete. Without naming Toyota directly, he said that some companies who invested in nickel metal hybrid batteries for hybrid cars (the Prius, for example) were caught flat footed by the transition to lithium-ion technology.
There is a lot of battery research going on all around the world. A fair interpretation of his remarks is that Ford thinks lithium-ion batteries are a nothing more than a waystation on highway to next-gen battery electric cars. When the time is right — i.e., when the technology is ready — Ford will be happy to jump in with both feet, but for now it is content to wait on the sidelines for the market to mature. So says Ford.
“We know the technology landscape is going to change,” Hua says. “You’ve seen predictions around cost per kilowatt-hour. Everyone believes that for us to really have a crossover between cost versus an ICE, you have to go post-lithium-ion. So, we don’t want to get into a situation where we invest billions of dollars of capital, have inefficient scale, be over-capacitized, and then have the technology landscape change on us. And then you’re stuck with that asset.” To correct the record a bit, not everyone believes next-gen batteries are needed. Many believe lithium-ion batteries will do the job just fine, and that they already do in 2018 if you design the car and plan the production accordingly.
Ford: Autonomous Cars Will Be Hybrids, Not Plug-In Electric Cars
Everyone and their brother knows that fleets of autonomous cars are coming soon to urban areas. Cities are strangling in congestion. If a normal privately owned vehicle is used less than 10% of the day — many much less — it stands to reason that one autonomous car in use 95% of the time could remove up to 10 conventional cars from metropolitan roadways and parking lots. There is some debate about that assessment, as commuters flood into the cities in the morning and flow back out again in the afternoon. The “AVs will cut traffic density by 90%” argument assumes demand will be constant throughout the day. Obviously, it is not.
Hua says hybrid cars will be the key to the autonomous car market for one simple economic reason. The cost of developing the technology to make self-driving cars will be high. Taking time out of the day to recharge the battery of an electric car will reduce the income each one is capable of generating below the point where manufacturing them will be profitable. His remarks did not make clear whether he is referring to conventional hybrids or plug-in hybrids. Nor did he touch on whether wireless charging might help keep all those autonomous cars busy moving people about on demand.
Does Ford Get It?
Hua is clearly a fellow who looks closely at the business case before making a decision. Timing is everything and the history of manufacturing is littered with the carcasses of companies that got things wrong. Sometimes those who are first to bring new products to market (think Fisker) are simply at the right place at the wrong time. Others wait too long to catch the next wave (Xerox comes to mind) and are left waiting at the station.
Hua offers clear eyed, common sense analysis — something that is often in short supply with companies like Tesla promising the sun, the moon, and the stars to anyone who will listen. It is impossible to know for sure which approach is correct until the future arrives. Ford may wind up being the tortoise to Tesla’s hare. We won’t know for certain until a decade or more from now. When the future gets here, Ford or Tesla will be proven right, but it seems increasingly unlikely they both will. But which one will have the last laugh?
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