Ford’s Push Into Electric Vehicles Is Timely – Forbes
Ford Motor Company (NYSE: F) recently announced that it would not be investing $1.6 billion in expanding its production facilities in Mexico. Instead, it will expand its production capacity in Flat Rock, Michigan. A significant item in this announcement was that the company would be expanding its electric vehicle production. The U.S. based auto maker announced that it would now be producing a hybrid version of the F-150 truck and sports car Mustang, a plug-in hybrid version of the Transit Custom commercial van and two new hybrid police vehicles. This is significant news as electric vehicles are closer than ever to being commercially viable. With the launch of the new 238 mile range Chevrolet Bolt and the impending launch of Tesla’s Model 3 in 2017, EVs could finally cross over from being a fringe figure on the horizon to a mass market product.
Properly speaking there is more than a social and environmental case to be made for electric vehicle. And with drop in lithium ion battery prices, this case is more potent than ever. Cars became the biggest consumer of lithium-ion batteries in 2015 and as a result battery prices have been dropping each year. Tesla’s Giga Factory in Nevada, which plans to double lithium ion battery production in a couple of years, will further cut down lithium ion battery prices. Additionally, research on increasing battery efficiency and energy density will allow auto makers to produce electric vehicles for prices competitive with Internal Combustion Engine powered vehicles in the near future.
This means that consumers can consider electric vehicles for purchase even if they are slightly more expensive than their ICE counterparts. A car purchase involves an upfront price paid to the car seller, which is followed by ongoing expenses paid over the period of car ownership. These include fuel costs, maintenance costs, servicing costs and other ancillary expenses. Additionally, car buyers tend to take into account the rate of depreciation of vehicles when purchasing them. Since electric vehicles have only around 10-20 moving parts compared to several thousand in ICE cars, they depreciate much more slowly. They can be refueled cheaply and require much less maintenance than ICE counter parts. This means that savings on the cost of ownership can be transferred to the purchase price quite easily. With battery prices dropping—battery prices make up around a third of the cost of making an EV currently—the purchase price is also dropping simultaneously. This makes Ford’s push towards electric vehicles all the more timely.
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