The electric car thing started by Elon Musk and his band of merry pranksters has really shaken up the world of auto manufacturing, despite what Joe Biden might have to say on the matter. It has made for some crazy shotgun weddings, like the short-lived marriage between General Motors and Nikola Motors. Mercedes and Toyota also embraced Tesla early on before backing away. For its part, Ford has forged links with Rivian and with Volkswagen. Here’s the latest news on that.
Splitsville For Ford & Rivian
According to Automotive News, after investing $1.2 billion in Rivian, Ford has decided to end its relationship with the audacious startup (outside of some shares of the company). “Right now, we have growing confidence in our ability to win in the electric space,” Ford CEO Jim Farley said during an interview last Thursday. “When you compare today with when we originally made that investment, so much has changed: about our ability, about the brand’s direction in both cases, and now it’s more certain to us what we have to do. We want to invest in Rivian — we love their future as a company — but at this point we’re going to develop our own vehicles.”
Don’t weep for Ford, however. Its investment in Rivian may have grown as much as tenfold when Rivian went public recently. It is unlikely GM’s trip down the primrose path with Nikola ended so well.
Ford thinks it is on a roll, with strong sales expected for its Mustang Mach-E, F-150 Lightning, and E-Transit vehicles. Farley also said last week Ford expects to catch up to Tesla in EV production and maybe surpass it before the end of this decade. It apparently no longer thinks it needs Rivian’s help to get there.
In 2020, the two companies ended a plan to jointly develop an electric vehicle that would be sold under the Lincoln brand. The news this week is that they have also stopped working together on an EV that would be marketed as a Ford product. The news is not unexpected. Until October, Ford had a seat on the Rivian board of directors, but no longer.
“Rivian’s a special case for us; it’s kind of like a brother or a sister, since we’re an investor,” Farley said. “We know RJ and the company really well.” He said the relationship between the two companies has not soured. In fact, it is “some of the best cooperation we’ve had with another company.”
For its part, Rivian said in a statement the two companies “mutually decided to focus on our own projects and deliveries” as demand for each of their EVs has grown. “Our relationship with Ford is an important part of our journey,” Rivian said, “and Ford remains an investor and ally on our shared path to an electrified future.”
One factor Farley cited in the decision is the difficulty of integrating another company’s electric architecture with software developed in-house by Ford. “We have slightly different business models,” he said. “We like what they’re doing, but we’re going to go our separate ways.”
Ford Is On A Tear
Ford believes it can add more value for shareholders than at any point in the past century. Its electric push is part of a broader reconfiguration that involves modernizing how it sells vehicles, reconfiguring pieces of its supply chain, and expanding into software services that will generate recurring revenue.
“As a leader of Ford I get really excited, because there hasn’t been a chance to transform Ford and create this much value since we scaled the Model T,” Farley said. “The chance to emerge out of this transition to a digital product with a much higher valuation is now much clearer.”
Ford has created a new business relationship with SK Innovation. The two companies are planning to build three US battery factories that will have a combined annual capacity of 129 MWh. Farley said that’s still not enough and Ford will need additional plants. “Already we need more than we planned,” he said. “I’m not going to give you a number, but it’s very clear we’ll have to move soon, and it will be more.”
Farley said Ford can counter Wall Street’s skepticism that traditional automakers have the ability to compete in the EV space with newer entrants such as Tesla or Rivian by reaching its ambitious production goals in the next 24 months.
“We’re different from these other companies in that we have three hits on our hands,” Farley said, referring to the Mustang Mach-E crossover, E-Transit van, and upcoming F-150 Lightning pickup. “We need to be No. 2 in the U.S. in electric sales, and we need to make money on those products. If we do those two things, Ford will be in a different situation, and I believe the narrative will be different.”
Supply Chain Changes
As Ford builds more electric and connected vehicles, Farley said it will need to rethink its supply chain. This week it announced an agreement with GlobalFoundries to take a more direct role in the purchase of U.S. made microchips, hoping to gain more control over chip design. Although Ford estimates the chip shortage will last into 2023, Farley said the crisis is easing.
“It feels like, with the semiconductors, we’re through the worst part, and we’re starting to proactively change our supply chain management. But will there be a memory chip shortage, or camera and sensor shortages we’ll all suffer through? I bet. If you learn anything from companies like Apple, when there’s a technology change, supply chains become strategic.”
There’s a silver lining to the chip shortage, however. “I think this crisis will be one of the biggest gifts our industry will get, because of the shift in supply chain,” Farley said. “We’ll look back and say we kind of grew up as an industry with this new bill of material.” The upshot may be that the limits of globalization have finally made themselves known and the benefits of local production can outweigh the advantages of the lowest possible cost a half a world away.
Second MEB-Based EV For Europe
Although Ford says integrating Rivian tech into its vehicles is a bridge too far, at the same time it is close to signing a deal with Volkswagen to develop a second electric vehicle based on the German company’s MEB toolkit, according to Inside EVs. The official announcement about the agreement is expected within weeks.
In the short term, Ford will be able to save time and costs by using MEB. However, only time will tell whether it will pay off compared to an in-house EV platform for cars. “Usually, the more serious a manufacturer is about something — in this case in electric cars — the more willing it is to invest in its own platform. From that perspective, the use of MEB indicates a modest interest in passenger electric cars,” Inside EVs writes.
Why would that be? Perhaps because Ford deems it more important to invest in the electrification of trucks and other commercial vehicles and needs to temporarily limit investment in car electrification. But the strategy does not bode well for US customers who are desperate for less expensive passenger cars so they too can join the EV revolution. Ford apparently has no plans at present to compete in that segment of the market.
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