“Ford Motor Co.said it would invest $1 billion in a new electric vehicle production facility in Germany,” WSJ writes.
Why It Matters: While a big step for Ford, it’s just the latest in a string of similar moves by global auto companies that are shifting away from combustion engines and to electric vehicles. Ford, itself, plans to begin production on its first European-built all-electric passenger car in 2023 and double the automaker’s spending on electric vehicles as a whole over the next five years.
“Most of the car industry’s well-known brands have dramatically increased investment into electric vehicles as the broader automotive industry begins in earnest to phase out traditional engines and shift almost entirely to electric vehicles and hybrids over the next decade.”
- Companies such as General Motors and Volkswagen are spending billions on EV technology.
- Jaguar Land Rover announced a few days ago its Jaguar luxury brand would be completely electric by 2025 and its entire lineup would be by 2030.
It’s not a bad time for Ford to look ahead either. The company has said it returned to profitability in Europe in Q4 2020 and was on pace to deliver a targeted 6% pre-tax profit margin.
- Ford has produced cars in Cologne since World War II, and the investment is part of plans to not only deliver a mass-market EV but bring the company’s European headquarters into the future.
- Ford plans to double its existing investments in EVs to $22 billion by the end of 2025.
From Morning Cents 1/13: “These legacy auto manufactures ($F, $GM, $FCAU) need to get their act together in bringing competitive electric vehicles to market soon because each year that goes by is another year Tesla extends their technology lead.”
My base case prediction is that the legacy automakers will produce electric vehicles in time to save themselves, but will be relegated to making relatively undifferentiated products and will not be the dominant owners of the profits driven by innovation in the space.