Ford Stock: Are Ford’s New Electric Vehicles a Threat to Tesla Motors, Inc.?

Ford StockElectric Vehicles Could Boost Ford Stock

Ford Motor Company (NYSE:F) will invest some $4.5 billion in the research and development of 13 new electric and hybrid-electric vehicles that the company with the blue oval will launch by 2020. This will bring electrification technologies to more than 40% of its global range, ensuring Ford stock can rely on an industrial and business plan, firmly anchored to the future. (Source: “Ford Adds Another $4.5 Billion To Its Electric Car Ambitions,” Fortune, December 10, 2015.) Could Ford’s electric vehicle (EV) investment be a threat to Tesla Motors, Inc. (NASDAQ:TSLA)?

If any company can translate the success of the “Model T,” which brought internal combustion transportation to the masses a century ago, to electric cars, it might just be Ford. While, Ford has many competitors, the company is not taking the challenge halfheartedly, directing its largest ever investment in the research and development (R&D) of vehicles equipped with electric propulsion in order to address the growing global demand for more efficient and cleaner vehicles.

The list of 13 new models includes the new generation of the “Focus,” the “Focus Electric,” which is to be offered with an innovative quick DC charger that can bring the level of battery charge to 80% in just 30 minutes (two hours less than the current generation). The electric Focus should appeal to drivers who would never have considered an electric car; after all, it will be far cheaper than anything offered by Tesla Motors. The new Focus Electric will be launched during 2016 in North America and Europe, sooner than Tesla Motors’ much-promised $35,000 “economy” model, and will have a range of about 100 miles.

Ford’s Practical Approach to Innovation

To optimize practicality, the new Focus Electric will have an “EcoGuide” feature, which maximizes the available energy supply, while also allowing for the recovery of power, regeneration, through the “Brake Coach” in order to maximize recovery and energy-efficiency. Ford will also continue to develop its batteries in a laboratory at the University of Michigan. (Source: “Ford seeks to satisfy younger consumers’ tastes,” Financial Times, December 14, 2015.)

Ford will expand its program of electric R&D to achieve specific engineering solutions tailored to make the most of the opportunities in markets where it is present. Ford is borrowing—if not in form and practice, at least in philosophy—from Tesla Motors. Not only does Ford want to make electric propulsion more affordable and more practical, but it also wants to offer customers innovative buying and ownership experiences. Ford’s team of anthropologists, sociologists, economists, journalists, and designers are working to identify customers and their needs by collecting additional data from previously untapped sources to help design new vehicles. (Source: Ibid.)

In addition to traditional market research, Ford is investing in social science research, observing the way its customers interact with their cars at the socio-cultural, technological, and economic level. This is not a “fly-by-night” approach; Ford considers these primary market research areas and in 2016, the company wants to double the number of projects based on ethnographic research.

A Challenge to Tesla’s Gigafactory

Of course, the sociological research is a complement to, rather than a substitute for, technical research programs aimed at improving the performance and practicality of electric and hybrid-electric propulsion, which Ford is conducting worldwide.

Specifically, Ford will continue research on the new generation of batteries in Europe and China, where it has developed hardware and software systems (of the HIL—“hardware in the loop”—type), which allow for the simulation of daily environments in order to test the batteries’ performance under all conditions, extreme hot and cold included. (Source: “Ford puts $4.5bn into e-vehicles,” Gadget, December 14, 2015.)

Ford will use batteries supplied by LG Chem, which has a long history of supplying batteries to General Motors and Hyundai, among others; Ford also has agreements with Daimler, Renault, and the Volkswagen Group. The company also aims to become a major supplier, if not the outright leading supplier, of lithium ion (Li-ion) batteries and cells.

To this effect, Ford recently acquired the rights to use NCM (nickel, cobalt, and manganese) cathodes from 3M, noting that this technology would be applied on a production car with a range of 200 miles starting in 2017. However, LG Chem is already working on deploying batteries with capacities of up to 120 kilowatts per kilowatt-hour. (Source: “Korean Batteries? Ford To Spend $4.5 Billion In EV,” Barron’s Asia, December 10, 2015.)

They have the advantage of costing much less than current generation Li-ion ones, even while having more range capacity, thus addressing costs and range anxiety. In this sense, Ford will pose a more-than-serious challenge to all of the major automotive groups and Tesla Motors, in particular.

Bottom Line on Ford Stock

Could electric vehicles be a boost for Ford stock? It’s difficult to say at this point. The segment still represents only a small fraction of the total automotive industry and even a big success might not move the needle at a big company. But if the automaker is successful, it could represent an important new business in the years ahead.

Owners of Ford stock should definitely be watching how these investments play out in upcoming quarters.

Stay in the loop. Follow Alessandro on Facebook and Twitter.