There's a lot of transition in the auto industry right now, but no other legacy car manufacturer may be undergoing bigger shifts than Ford (F -0.04%). The company recently announced that it will use a new production process to build and launch an entirely new electric vehicle (EV) lineup, beginning with a pickup truck that costs around $30,000.
It's an ambitious plan, and Ford hasn't laid out all the details yet, but it's clear that this is the company's roadmap over the next few years. For that reason, it's worth diving into what Ford has said about its plans, as well as some of the biggest challenges it'll face.
Image source: Ford.
1. It'll have an entirely new EV platform by 2027
Ford said it assembled a stealth skunkworks team to completely rethink the assembly line for a new era. The result will be the Ford Universal EV Platform that future vehicles will be built on. Specifically, the assembly line will reduce parts by 20% compared to a typical vehicle and have 40% fewer workstations, and vehicles will be 15% faster to assemble.
The goal is to get a new EV pickup truck to customers by 2027, with a price tag of around $30,000. That's an enormously ambitious plan. To get there, Ford will spend $2 billion converting a Kentucky factory for the new vehicle lineup, which will eventually make more than just the pickup truck. It'll also spend an additional $3 billion previously announced for a battery factory in Michigan.
2. Ford will shift toward improved profitability
Of course, any new venture a company makes has the goal of making money. But it's worth mentioning that Ford appears laser-focused on making this successful and realizes that the next few years are a do-or-die EV scenario for the company.
Ford CEO Jim Farley said in a press release: "We have all lived through far too many 'good college tries' by Detroit automakers to make affordable vehicles that ends up with idled plants, layoffs and uncertainty. So, this had to be a strong, sustainable and profitable business. From Day 1, we knew there was no incremental path to success."
There's a sense of urgency from Ford here. Frankly, that's good to see. Ford understands that competition from China is fierce and that if those rivals were ever to sell their products in the U.S., legacy automakers would not be able to compete. And with the average transaction cost of an electric vehicle in the U.S. being about $57,000, Ford is positioning itself both to be profitable with its new EV line, and to appeal to the budgets of the masses.
While there's no guarantee of success, Ford's aim over the next several years to have a new, profitable EV lineup that's efficiently produced and affordable is a step in the right direction.
3. There will still be some headwinds from tariffs
While Ford is clearly working to reduce its exposure to automotive tariffs, it's important to note that it's not out of the woods. Ford said tariffs have cost the company about $800 million already. Management recently increased the projected hit to its pre-tax adjusted profit to $3 billion -- $500 million higher than previously estimated.
In addition to tariffs, the company will have to contend with a less hospitable EV environment as the federal EV credits disappear at the end of September. Ford's new lower-cost EV model is accounting for this and could spur its own demand simply by being an affordable EV. But it's noteworthy that the federal government is backing away from trying to spur the electric vehicle market. It means that Ford and other automakers will be left to convince buyers that electric vehicles are worth buying on their own merits.
Where does all this leave Ford in three years?
Even with Ford's ambitious EV plans, there are still a lot of unknowns with the company over the next few years. For one, will customers want its new EVs? I wouldn't mind a $30,000 pickup truck option, and others probably wouldn't either. But that leads to another question: Can it actually deliver on that price tag? Plenty of automakers have promised an affordable EV in the U.S., and it usually ends up being more of a unicorn than reality.
Ford has a lot to prove over the next three years. The company's stock will likely rise or fall based on how well it delivers on its latest EV plan.
