Key Takeaways
- Ford is seeking help from suppliers to lower production costs, asking for creative ideas to make EVs more affordable.
- Hybrid vehicles are gaining more interest in part due to the high cost of electrric vehicles.
- While cost savings from suppliers may eventually lower prices, consumers shouldn’t expect cheaper EVs in the near future.
Building a vehicle is expensive, so Ford is looking for a little help from its suppliers to bring down costs. In a recent “call to action” from chief supply chain officer Liz Door, the company asked suppliers to get creative in an effort to bring down its production costs, according to Automotive News.
Automakers went all-in on electric vehicles, but sales of those vehicles have slowed. Instead of making the move to electric, hybrid vehicles that are experiencing an uptick in interest. Anyone nervous about the move to a fully electric vehicle can get a taste of that experience with a plug-in hybrid, which helps make them hot sellers.
EVs Aren’t Cheap
A big challenge for consumers is price. Electric vehicles like the Mustang Mach-E and F-150 Lightning simply aren’t as affordable as gas, hybrid, or plug-in hybrid models. It doesn’t matter how much someone wants an EV, if it won’t fit the budget, then they’re not going to buy one. One way to bring pricing down is to reevaluate the cost of building an EV in the first place, and that’s exactly what’s happening at Ford.
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In the memo, Door says, “We have all invested heavily in the success of the EV business, and we will all win or lose together.” It’s not just Ford who needs this to work, it’s the suppliers, too. The idea is to look at every potential bit of cost savings, no matter how small. Even ideas previously rejected are on the table. That all sounds great, but will this help make EVs more affordable when you walk into the dealership?
Will You Save Money?
We spoke to Sam Abuelsamid, principal analyst at Guidehouse Insights to find out if small cuts in production costs translate to lower car prices. “Any small reduction in cost won’t have much, if any, impact on the price a consumer pays in a situation like what we have here where the manufacturer is losing money,” he said.
“Any savings are unlikely to be passed along until they at least reach break even.” -Sam Abuelsamid, Guidehouse Insights, Principal Analyst
Related
Ford Losing $36,000 On Every Electric Vehicle It Sells
It’s been a challenging third quarter for the Blue Oval, particularly when it comes to selling EVs.
And that’s a problem for Ford, with the company losing over a billion dollars in EVs last quarter. It’s likely part of why it’s seeking the help of its suppliers to rein in those costs and, hopefully, make EVs a better financial proposition. Ford told CarBuzz it’s committed to the process.
“We are focused on delivering affordable electric vehicles to our customers and building a profitable EV business. We value our suppliers’ collaboration and asked them to share their ideas for cost reductions.” – Jessica Enoch, Ford Spokesperson
A Waiting Game
If you’re thinking of buying a new vehicle soon, then you’re probably not going to see any impact from any production savings Ford works out with its suppliers. That doesn’t mean that those savings won’t appear, just that they won’t appear tomorrow.
“If the automaker can aggregate enough savings, it would likely be close to a year before any of that translates to MSRP.” -Sam Abuelsamid, Guidehouse Insights, Principal Analyst
That’s all because it’s such a complicated process. “Suppliers may have to do reengineering, and everything needs to be validated at a component, system, and vehicle level before they start shipping to dealers or customers,” said Abuelsamid. The savings might come eventually, but don’t expect cheaper EVs anytime soon.
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