Some global carmakers are using ICE cars to make the road to EVs a little easier.
The pandemic has wreaked havoc on the car-making world. Throw in widespread semi-conductor shortages and supply chain interruptions and you can imagine the turmoil.
It’s felt like an avalanches for some car-makers. But a bigger industry change is shifting the entire glacier. And it’s effects are showing.
“We have to change our cost profile,” he said during an interview with CNBC, where he addressed the various issues behind Ford’s billion-dollar profit shortfall.
Billion dollar shortfall.
Product complexity. Semiconductor shortages. Company culture. Supply chain problems. More.
They were all cited as contributors.
But amongst them is arguably the biggest change ever in the global car industry: the shift to electric vehicles (EVs).
This shift is expensive. Even though Farley has separated Ford’s EV and internal combustion engine (ICE) operations into two divisions, replacing ICE model ranges with EVs is a seismic financial change.
Right now, global carmakers are undergoing perhaps the most expensive and stressful fundamental shift since mass-production of cars began.
Adding weight to this heavy load is the competitive quest to create EVs with better onboard batteries, longer single-charge driving ranges, and so on.
Factor in that big automakers have long-standing cultures and processes, both of which have been critical to the repeatability needed to make safe cars that work as intended. Changing them to competitively make EVs won’t be easy.
And while these big changes occur, cashflow from ICE vehicle sales is slowing just as the costly ramp-up of EV development and production intensifies.
It’s a tricky bridge to cross.
The effects are huge. Farley put it in clear terms to Automotive News:
“We have to design the vehicle totally differently. We have to manufacture it, source it and sell it totally differently. That’s been a big transition.”
In the car industry, change doesn’t get any bigger than that.
It’s akin to u-turning an oil-tanker.
But to help keep cashflows strong, some carmakers are deploying different tactics to make this bridge crossing less of a strain – and more of an opportunity.
Even though a number of OEM carmakers are fully committed to EVs as their future, they’re taking creative approaches to unlock new revenue streams from their existing and outgoing ICE offerings.
They’re using external specialists to keep these new cars unique and fresh, offering specialised variants for different buyers in certain markets.
They’re using these specialist companies to create new model variants (such as the Nissan Navara Warrior by Premcar) and convert left-hand drive- (LHD) only models to right-hand drive (RHD) for markets that haven’t previously sold these cars.
And other tactics.
These smaller local engineering firms are comparatively agile, and they’ve got the same know-how and tools to create these special cars for large, capital-stressed carmakers.
When you consider these projects don’t require huge investments and create attractive results (especially for the customers who want these new cars) and you can see why more brands are using this approach.
And their returns are helping to bolster the ICE-to-EV transition bridge for big carmakers.
Everyone knows the road to full-scale EVs is going to be tough at times: for carmakers, consumers, governments, industry suppliers, electricity providers, and more.
Ford’s Executive Chairman Bill Ford agrees:
“Jim’s got a very hard job, probably the hardest job I’ve ever seen for a CEO,” he told Automotive News.
Farley will drive major change within Ford to push down costs as his factories start building more EVs and fewer ICE vehicles. We started building Ford’s Performance Vehicles in Australia back in 1996 and their engineering community is world-class. He’s sure to succeed.
A tough earnings call might have caused Jim Farley to express deep frustrations. But don’t be mistaken; this isn’t a Ford-exclusive problem. It’s across the whole industry.
Other carmakers will be feeling the same, and likely making similar deep changes as they make the transition to full-scale EV production.
But effective use of firms like ours is helping carmakers use current and soon-to-be-released ICE models to make that bridge crossing a little easier.
Bernie Quinn – Engineering Director, Premcar Pty Ltd
About Premcar – Premcar Pty Ltd is a leading Australian vehicle engineering business that specialises in the automotive, defence and aerospace industries. For more than 25 years, global car-makers have made Premcar their go-to partner for the complete design, engineering and manufacture of niche-model new cars, full-scale new-vehicle development programs, and electric vehicle (EV) conversions and manufacturing. As the name behind more than 200,000 new cars and 55,000 new-vehicle engines, Premcar’s body of work is extensive and has delivered technical and sales success for major car brands from Europe, the USA, Japan, China and Australia. Visit premcar.com.
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