By Gary S. Vasilash
Much of the attention given to Ford’s Q4 2023 earnings call last week has been focused on CEO Jim Farley’s comment:
“[W]e made a bet in silence two years ago. We developed a super-talented skunk works team to create a low-cost EV platform. It was a small group, small team, some of the best EV engineers in the world, and it was separate from the Ford mothership. It was a start-up.
“And they’ve developed a flexible platform that will not only deploy to several types of vehicles but will be a large installed base for software and services that we’re now seeing at Pro.”
Somehow the inherent mystery of a “skunk works” has gotten people all excited.
Would they be so excited to know that the skunkworks methodology goes back to 1943 in the aircraft industry?
Yes, an 80-year-old approach.
Well, You’ve Got to Build It. . .
The other thing about this is that it is one thing for an R&D team operating independently to develop something and a whole other thing for that development to be engineered for and launched in production.
Launches have been something that Ford has been finding a bit troubling, so there’s that.
And it should be noted that the company also announced last week that its Ford e operation—as in the electric vehicles—lost $4.7 billion last year and the company anticipates losing $5 to 5.5 billion this year on Ford e.
The excitement of the skunk works project was certainly helpful from diverting some attention to that red ink.
What About This?
But what was largely overlooked was Farley’s comments on hybrids.
As in,
“Our global hybrid sales were up 20% last year, and we expect them to be up 40% this year.”
And:
“We now have the No. 1 and No. 2 best-selling hybrid trucks in the U.S. Maverick is No. 1. And we’re the No. 3 hybrid brand in the U.S. behind Toyota and Honda. But unlike them, our hybrids really sell best on trucks for our side.”
Given that Farley said “And margins on hybrids are closer to ICE, much higher than EV margins,” you’d think hybrids would be the headline going forward if for no other reason than the company can make money on them, something that it is not going to see on the EV side of the business until. . . . Well, that remains to be seen.
Not Exactly a Strong Third
While it is nice that Farley is so bullish about the company’s hybrid performance, it is worth really putting that into context.
Of course its hybrids “really sell best on trucks” because with the only hybrid Ford has without a box on the back is the Escape.
And as for it being number three, know that these are the number of hybrid sales for the three companies in 2023:
- Toyota: 523,664
- Honda: 293,640
- Ford: 133,748
In other words, it sold less than half of what Honda did and about a quarter of what Toyota did.*
So while the claim is factually true, one should perhaps not be too chuffed about the Ford hybrid performance.
About a quarter of Toyota and Honda sales are hybrids.
About 7% of Ford’s sales are hybrids.
Did I mention the skunk works. . .?
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*It is worth noting that until recently Toyota was treated like some technological troglodyte for its continued support of hybrids and its not all-in approach to EVs. Not only do we see that Ford is reconsidering its positioning vis-à-vis hybrids and full EVs, but General Motors, which doesn’t have much of a record in the hybrid space, has announced that it, too, is going to bring hybrids to the U.S. market. Farley pointed out on the earnings call that consumers can quickly do the math on the fuel efficiency benefits of hybrids and, perhaps the most important factor: “they don’t have to change their behaviors.” It is surprising that there seems to be so many auto execs who ignore the long public charging time required for EVs compared with pumping gas: perhaps this is a case that when they get behind the wheel of their company vehicles someone else has done the charging.
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